Diaspora Bonds: Can Success Be Replicated?
15 Pages Posted: 18 Feb 2021
Date Written: January 5, 2021
Following recent interest in the diaspora-led development frameworks, this paper outlines contours of a successful diaspora bond program in a small developing economy. Leveraging historical experiences, the paper addresses some preconditions for borrowing at a “patriotic discount” in the volatile and uncertain macroeconomic environment. Counter to the recent literature, newly formed “diaspora stock” and labor migrants’ remittances are not the primary determinants of an operational diaspora-finance framework. Instead, there are three broad prerequisites for a diaspora finance (bond) success: a) strategic or the macroeconomic aspect (either existing capacity or clear plan for such); b) tactical or transparency in administering a financial scheme (for bonds, the degree of financial deepening matters as well); and c) operational component embedded in profound understanding of the expatriate community’s intricacies and a trustworthy relationship between the homeland and its diaspora. The concept of diaspora bond is directly applicable to the capital markets emergence and economic development challenges of a range of small open economies.
Keywords: diaspora, diaspora bond, economic development, patriotic discount
JEL Classification: F3, F4, O11, P2
Suggested Citation: Suggested Citation