Business

Diaspora bonds coming to Kenya, and maybe Ghana

Oct 9, 2014 /

In 2013, international migrants sent $413 billion home to families and friends — a huge sum compared to the $135 billion sent in foreign aid the same year. Yet the promise of this money, known as remittances, is stifled by a big problem that no one seems to be worried about.

Economist Dilip Ratha discusses the issue in today’s TED Talk (The hidden force in global economics: sending money home). In this deeply human talk, Ratha makes the case for diaspora bonds that would tap into the estimated $500 billion in annual savings held by international migrants around the globe.

Functioning like regular savings bonds, diaspora bonds would be sold by governments, private companies and public-private partnerships to migrants living abroad. And they would be sold in small values — from $100 to $10,000. The interest on these bonds could fund schools, airports and other key institutions in their home country.

This idea is starting to take root in Africa; the Kenyan government is finalizing plans to start issuing diaspora bonds by June 2015. To imagine the size of the market, Kenya’s diaspora community sent $807.2 million between January and July of 2014 — an almost 10% increase over last year. And the Ghanaian government is weighing the decision to adopt diaspora bonds as well.

Watch the talk.

Read our live coverage of TEDGlobal 2014.

Featured image via iStock.