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.

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Watch the talk.

Read our live coverage of TEDGlobal 2014.

Featured image via iStock.