A Bond for the Homeland

Migrants send billions of dollars home each year; they also save a lot, too. Instead of stuffing cash under the mattress, the developing world's diaspora could do a lot more good if they invested in their homeland. 

BY NGOZI OKONJO-IWEALA, DILIP RATHA | MAY 24, 2011

Reducing poverty, creating employment, and building schools and roads for the benefit of billions of people in developing countries requires large amounts of funds. But there are not that many new sources of funding that can be tapped for such noble purposes. The migrants of developing countries offer a rare pool of resources that can be tapped via diaspora bonds.

According to estimates from the United Nations, there are more than 200 million migrants worldwide. The size of the global diaspora is even larger if one considers adding second- and third-generation migrants to the mix.

The money these migrants send home -- in the form of remittances, usually through money-transfer services like Western Union -- each year is considerable. Migrants from developing countries sent more than $325 billion in remittances last year.

All this is well documented and exhaustively studied by academics and development experts. What's less well known, perhaps, is the enormous savings these migrants have amassed. Preliminary estimates by the World Bank suggest that annual savings of the diasporas from developing countries could be in the range of $400 billion. For those from Africa, the figure is estimated at $52 billion.

These savings are mostly held as cash under the mattress or in low-yielding bank accounts in the countries of destination. Imagine if some of those savings were channeled into development efforts in poor countries. If one in every 10 diaspora members, whether rich or poor, could be persuaded to invest $1,000 in his or her country of origin, developing countries could potentially raise $20 billion a year for development financing.

Enter the diaspora bond -- a retail saving instrument marketed only to migrants. Through retailing diaspora bonds at small denominations ranging from $100 to $1,000, a developing country government or a reputable private corporation in a developing country can tap into the wealth of relatively poor migrants. Wealthier migrants could, of course, invest larger amounts and the bonds would also be sold in large denominations to institutional and foreign investors.

The money could then be used to finance projects that interest overseas migrants -- such as housing, schooling, hospitals, and infrastructure projects with a concrete benefit to their families, or the community back home.

Diaspora bonds can tap into the same kind of emotion migrants feel when cheering on their national team in a football match, a long way from their homeland. Patriotism could in effect become the effective tool for helping a developing country fulfill its development dreams.

There is also a readymade marketing avenue to target the diaspora. These bonds can be sold globally to diaspora groups through national and international banks and money transfer companies. They can be marketed through churches, community groups, ethnic newspapers, stores, and business associations in places where migrants live in large numbers. Investment bankers may be needed to structure these bonds and ensure compliance with securities regulations in the United States and other jurisdictions.

MIGUEL MEDINA/AFP/Getty Images

 

Ngozi Okonjo-Iweala is managing director, and Dilip Ratha is manager of the migration and remittance unit, at the World Bank. The views expressed are those of the authors and not necessarily those of the World Bank or its executive directors.

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May 24, 2011

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ROMAN GIL

2:11 AM ET

May 25, 2011

We Cannot Afford To Send Money To Benefit Other Countries

The money earned by illegal immigrants is mostly derived from incomes that were not taxed. Legal immigrants paid taxes but in any case both groups send badly needed money out of America. This is adding to our national economic decline. We cannot concern ourselves with benefitting other countries, we nedd help ourselves. Only elites are divorced from the reality of the economic crisis that America and Europe are suffering. It's time to think about our country first, second and third.

The USA is overpopulated. Every year millions of legal and illegal immigrants are added to the population of over 311 million (nobody knows how many illegal aliens are here). In Rockland county NY (one of the wealthiest) over 20% of the population is on Medicaid, the vast majority are illegal alien anchor babies. Medicaid was a welfare program supported by Federal, State and local governments to provide health care for the poorest Americans.

The government does not have a plan for how this huge and rapidly growing poor population will be supported. They need education, Medicaid and must consume natural resources, including energy, housing, transportation government services etc. We must enforce immigration laws and stop mass immigration or the local taxes required to maintain the growing population of poor immigrants and poor American legal residents will first drive hard pressed taxpayers into poverty, and second most local governments will eventually join the growing list of American bankrupt States and local governments.

Overpopulated countries including India and China know the destructive effects of overpopulation and limit population growth and have no mass immigration policies. 47% of American households are too poor to pay income taxes. The immigrants will mostly join the ranks of non-taxpayers because there are not enough high paying jobs for even citizens and legal residents. Local property taxes are already crushing the home owners because they increase every year without regard for the incomes of the property owners.

The USA industrial base of 9% of the total economy cannot support the present population at a decent standard of living without massive debt. In 1850 the USA had an economy that was 10% industrial but the country was virtually empty west of the Mississippi river. Now there are not enough taxpayers to support a government that has over 20 million employees, (Federal, State and local) and at least an equal number of workers that depend on government directly or indirectly

The government must reduce its size by 40% to live within its tax income. We cannot continue government borrowing. Many State and local governments are now bankrupt. The Federal government must beg and borrow $1.65 Trillion this fiscal year. There are not enough taxpayers to support the present large government and raising taxes is not the solution because like any drug addict, the government will consume the larger income and go deeper into debt.

America must rebuild its industrial base and stop the global corporations from removing the little industry that is left. The age of mass immigration must end. There are not enough middle class jobs for citizens and legal residents. Intervention in foreign affairs and foreign aid must also stop.

We are running America to the ground. The Federal government must beg and borrow $1.65 trillion dollars a year. A country that is dependent on imports and loans cannot be independent.

Roman Gil
http://roman-gil1.blogspot.com

 

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8:11 AM ET

June 12, 2011

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2:00 AM ET

June 23, 2011

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