Diaspora Investment in Africa: Myth or Reality?

Feb 25, 2020
Abdelkader Benbrahim , Partnership Coordinator, Making Finance Work for Africa
Leon Isaacs , CEO, DMA Global Ltd

The relationship between migration and development has, since the turn of the millennium, become part of mainstream development-policy thinking. One theme that has featured prominently in the discourse is the potential role that diaspora communities can play in promoting the economic development in their countries of origin. This interest was further strengthened by the emerging trends and awareness of remittances and its linkages to increased investments and poverty reduction. Remittances to developing countries is estimated to reach $551 billion in 2019[1].

For centuries, African diasporas have continued to make significant contribution to the continent’s socio-economic development through the transfer of skills, socio-cultural influence and, not least, remittances, which have far outweighed all sources of external financing.  Furthermore, it is estimated that the African diaspora has accumulated over $30 billion in annual savings outside of their home country. The idea of putting diaspora capital to more productive use has been further amplified by the necessity to explore new sources of financing for investment to supplement traditional domestic and external resources. A recent report by the Sustainable Development Goals Center for Africa reveals the immense challenge that African countries face in financing the Sustainable Development Goals (SDGs)[2].

Yet despite the potential, the debate to secure diaspora investment to finance development has frequently swung between optimism and pessimism. Historically there are not many examples of successful diaspora investment globally. The optimists are quick to point out to the Indian and Israeli diaspora bond examples, however, both were raised in exceptional circumstances that may not be applicable to many countries. In Africa, some governments have attempted to tap into this resource, though not many of them could be qualified as successful in their outcomes. When it came to bond issuance, only Nigeria’s example, issued in 2017, can be considered a resounding success[3].

So what’s behind the contrasting outcomes of diaspora investment? And what is really required to translate the “diaspora investment’ vision into a reality? Making Finance Work for Africa (MFW4A) in collaboration with DMA Global and International Organization for Migration (IOM) have set out to answer these questions. The Toolkit for Understanding Diaspora Investment in Africa, developed by DMA Global, is the culmination of many years of conversations that emanated from the study A Systematic Approach to Supporting Diaspora Investment in Africa. The study sought to develop a methodology to help countries identify opportunities to boost diaspora capital as a viable source of productive investment, and the best approach to attract this investment. The resulting Toolkit, which includes a 5-part handbook and an accompanying Diaspora Investment Assessment Template, provide a systematic guide for governments to work through to ensure that diaspora investment efforts are successful. It also sheds light on what donors and development partners can do to support them. 

The chart below shows an overview of the different investment channels that are covered in the template. 

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The study also laid out a number of insights and recommendations for effective diaspora investment programming, including:

  • Simplify project design. Too many of the projects that were reviewed were overly complicated
  • Investment areas of interest tend to be determined by government, less often by development finance institutions, and in rare cases by the diaspora communities themselves
  • Understand the demand from diaspora, and support with marketing
    • Diaspora may be interested in a broader range of investments – not just in their own country
  • Registering with foreign regulators is expensive but is ultimately unavoidable
    • Bonds feature more prominently than other methods
  • Ability to issue Eurobonds is an adequate proxy for ability to issue diaspora bonds
  • Ensure bond issuances are appropriately positioned and designed with care
  • Countries need to leverage the clear non-financial link to their home country that many migrants have
  • Most experts felt that the previous initiatives had fallen short of success, but there is a general lack of consensus on what success is
  • Lack of data is a continual challenge
  • Diaspora investors need support throughout the investment process

Our consultations revealed a clear interest from government officials to explore ways to raise finance and leverage diaspora capital for more productive use. However, we have also seen that most countries are facing important challenges because of a lack of understanding and information of their diaspora. The Toolkit’s value is in giving the countries the opportunity to benchmark and assess their knowledge on their diaspora, and in providing a structured framework to guide the decision-making process and the steps to be taken to leverage that community, so that recommendations are well-considered and robust.

The following chart shows the Diaspora Investment Assessment Template.


It should be stressed however that developing a diaspora investment programme is a thorough process that requires long-term commitment, involves considerable time in planning and product design, and significant resources in execution to reach and mobilise the diaspora. A successful diaspora investment program needs also to be part of a national/regional strategy with defined goals and action plans if it is to build trust among diaspora communities. A government’s engagement with their diaspora is a key tool for being able to mobilise resources. One clear key component of the diaspora investment strategy is in understanding the diaspora. 

Indeed, it should be acknowledged that not every African country is currently in a position to implement a fully fledged diaspora investment programme. However, the Diaspora Investment Assessment Toolkit is the perfect tool to enable countries to understand their current level, identify what may or may not be possible and to determine what steps they can take now to improve the effectiveness of potential initiatives in this area.

Finally, we believe that any diaspora investment initiative should be multi-dimensional and multifaceted. It requires in-depth understanding of the diasporas and not just a comprehension of a financial  instrument. Improved relations between the country of origin and the diaspora will promote feelings of ‘being valued’, improve trust and create important channels for communication.  


[1] The World Bank. Data releases: Remittances to low- and middle- income countries on track to reach $551 billion in 2019 and $597 billion by 2021 [online] Washington, DC: 2019.

[2] Additional annual financing required to attain the SDGs in Africa is estimated between $500 billion to $1.2 trillion.

[3] In 2017, the Federal Republic of Nigeria became the first African country to issue a Diaspora Bond structured as Global Bond. The bond was oversubscribed at 130%. This is in contrast to the other diaspora bonds in Ghana, Kenya and Ethiopia that didn’t reach the issuance targets.

About the Authors:

Abdelkader Benbrahim is the Financial Sector Advisor leading MFW4A’s Financial Inclusion work stream. He also leads efforts to support digital finance, remittances, diaspora investment and housing finance. Prior to joining MFW4A, he worked for Global Affairs Canada serving both the President’s and Minister’s Office. Abdelkader has a Master’s in Information Systems and Digital Innovation from the London School of Economics and Political Science.

Leon Isaacs is the Founder and Chief Executive Officer of DMA Global Ltd. Leon is recognised as a global authority in the remittances and money transfer industry as well as a seasoned expert and business leader. He specialises on all elements in connection with remittances, payments, financial inclusion and diaspora investment. Leon was also Managing Director of the International Association of Money Transfer Networks and is an observer at the G20 Consultative Committee of the Private-Public Sector Partnership on Remittances.


09:15 pm

I’ve read a lot about the growing economy in African countries, but it is not clear to me exactly how one can ‘invest in Africa.’ I’ve read the Ghanaian seven pillars to attract more African Americans, but how we might invest and in what sectors needs would be great information to have.

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