By DEJI NEHAN
Every year, people from developing nations who live and work abroad send billions of dollars back home. These funds, known as remittances, have long served as a financial lifeline for families, covering everything from school fees and food to hospital bills. But in recent years, a growing conversation has emerged: can these remittances go beyond consumption? Can they help build infrastructure? Can they grow local businesses and create jobs?
The answer is yes. Diaspora funding holds untapped potential for national development, especially in two of the most crucial sectors: infrastructure and small and medium-sized enterprises (SMEs). This article explores how diaspora money, if channelled strategically, can transform communities, create long-term value, and play a central role in building the future.
The Immense Power of Remittances
Remittances are a powerful source of foreign exchange. According to the World Bank, global remittances to low- and middle-income countries hit over $650 billion in 2023. In some countries, diaspora remittances make up more than 10% of GDP. Yet, these funds are typically informal and personal, often used to cover basic needs.
While that usage is critical, it often doesn’t lead to lasting impact. Infrastructure crumbles, businesses struggle to scale, and governments remain overstretched. Redirecting even a small percentage of diaspora funds into structured investments could provide a game-changing boost to long-term development.
Why Focus on Infrastructure and SMEs?
The link between infrastructure and economic growth is well-established. Without reliable roads, electricity, water, and internet, businesses cannot grow, schools falter, and healthcare systems collapse. Infrastructure is not a luxury; it is a necessity.
SMEs, on the other hand, represent the lifeblood of most economies. They create jobs, drive innovation, and stimulate domestic production. Yet, they are often underfunded, under-supported, and overlooked by formal financial institutions.
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Channelled wisely, diaspora funding could address the needs of both sectors, unlocking widespread socio-economic benefits.
Unlocking the Potential: Models for Diaspora Investment
Diaspora Bonds
Government-backed bonds targeted at diaspora communities.
Offer fixed returns and patriotic appeal.
Used successfully in countries like Nigeria, Ethiopia, and India.
Funds go directly into infrastructure or national development projects.
Cooperative Diaspora Investment Groups
Diaspora communities pool resources to fund projects back home.
Can finance real estate, energy, agribusiness, tech hubs, or industrial parks.
Emphasis on transparency, shared ownership, and profit-sharing.
SME Matching Grant Schemes
Governments or NGOs match diaspora contributions to vetted SMEs.
Increase capital availability for businesses.
Encourages diaspora involvement in local entrepreneurship.
Diaspora Mutual Funds
Professionally managed investment vehicles.
Allow diaspora investors to spread risk across multiple sectors.
Can fund infrastructure, health, education, and agriculture.
Real Estate and Public Infrastructure Co-Investments
Diaspora investors join forces with local developers or public agencies.
Projects include affordable housing, schools, roads, and health centers.
Clear returns through rental income, service fees, or government guarantees.
The Role of Technology
Fintech platforms can revolutionise diaspora funding. Digital wallets, blockchain-based investment tracking, and secure cross-border payment systems can: ensure transparency, reduce transfer costs, offer real-time reporting and build trust and attract more investors.
Mobile banking and crowdfunding platforms can also allow diaspora investors to fund specific local projects such as a school, solar power hub, or clean water facility with updates and evidence of impact.
Overcoming the Barriers
Despite its potential, diaspora investment is not without hurdles. Common challenges include:
Trust Deficit: Many in the diaspora hesitate to invest due to fears of mismanagement, fraud, or lack of accountability.
Poor Governance: Inconsistent policies and corruption deter long-term planning.
Lack of Awareness: Many diaspora members are unaware of investment opportunities.
Limited Financial Products: Few banks offer targeted diaspora investment instruments.
Strategies for Governments and Institutions
To unlock diaspora potential, the following steps are essential:
Establish Diaspora Investment Agencies: Dedicated units to liaise with diaspora communities and manage funds transparently.
Create Incentives: Offer tax breaks, land grants, or citizenship benefits for diaspora investors.
Partner with the Private Sector: Banks, fintech companies, and local businesses must be engaged.
Legal Frameworks: Clear laws must protect diaspora investors and ensure dispute resolution.
Awareness Campaigns: Information drives to showcase opportunities, success stories, and risks.
The Role of Diaspora Communities
Diaspora groups are not just donors; they are investors, mentors, and bridge builders. Their knowledge, networks, and capital are vital. Diaspora communities can:
Form investment cooperatives.
Sponsor skill-building and business incubation programmes.
Mentor young entrepreneurs.
Create diaspora directories to map expertise and link opportunities.
Diaspora chambers of commerce and associations can also partner with embassies, trade missions, and development banks to align goals and strategies.
Case Studies: Lessons from the Field
Nigeria: In 2017, Nigeria launched a diaspora bond that raised $300 million for infrastructure. Oversubscribed by investors from 45 countries, the success highlighted strong diaspora interest.
Ethiopia: Issued diaspora bonds to fund the Grand Ethiopian Renaissance Dam. Though the uptake was mixed, it sparked dialogue on improving terms and trust.
India: Successfully raised billions through diaspora bonds in the 1990s and early 2000s to stabilise currency and fund development.
Rwanda: Actively engages its diaspora through dedicated offices and inclusive national planning.
Turning Emotion into Action
Diaspora contributions are often driven by emotional love for family, attachment to roots, pride in homeland. This emotional capital, if matched with sound structures, can become financial capital that transforms nations.
Sending money for school fees is noble. But investing in the school itself in its buildings, teachers, and digital tools creates lasting change. Supporting a sibling’s business is generous. But co-investing in SME incubators or local credit unions multiplies that impact.
This is the shift needed: from reactive giving to strategic investing.
A Shared Responsibility
It is not just up to the diaspora. Governments, financial institutions, NGOs, and the private sector must create the right environment. This includes:
Transparent governance systems.
Measurable impact metrics.
Easy and affordable remittance options.
Safe investment platforms.
Local capacity building to manage funds effectively.
In turn, diaspora investors must be willing to see themselves not just as supporters, but as stakeholders in their country’s development.
Final Thought: A Future Built Across Borders
Diaspora funding has the potential to be more than a safety net. It can be a springboard. A new generation of roads, businesses, schools, and clean energy solutions can rise — not just through aid or loans, but through the passion and commitment of people who live abroad but never forget home.
By building bridges between emotion and enterprise, memory and modernity, the diaspora can help shape a brighter, more prosperous future. The money is there. The desire is there. All that’s needed now is the structure and the vision to make it work.
