Last week we covered the importance of Diaspora to economic growth. This week we focus on how we can make it easier for the Diaspora to contribute to Kenyas economic growth. The potential contribution of the diaspora to a countrys development goes beyond personal remittances. These contributions range from knowledge exchange, increased trade links, and better access to foreign capital. It is estimated that the African Diaspora save USD 53.0 bn annually, most of which is invested outside Africa and could be potentially mobilized for Africa via various investment instruments such as diaspora bonds.
The aim of this piece is to understand different ways - through investments, trade links, skills and technology - how diaspora resources can potentially be mobilized for the development of Kenya. Diasporas contribute to their home country through (i) intellectual capital, (ii) financial capital, (iii) political capital, (iv) cultural capital, and (v) social capital. In our Cytonn Report #40, we discussed the immense contribution of the diaspora to India and we now try to point out the various initiatives the Indian Government took to achieve such outstanding effects. We also look into the gaps the Kenyan Government needs to fill and shed light on the areas they have done well.
The Government of India has addressed the Indian diasporas dream to maintain a strong and durable connection with their homeland, and initiated different programs and initiatives that serve the purpose of encouraging further diaspora engagements, and improve their contribution to the socioeconomic development of their homeland. The various initiatives range from:
- Dedicated Government Ministries - The Government of India has maintained a Ministry of Emigrants and Members of the Diaspora and the Ministry of External Affairs that aim to address the welfare of the Diaspora. Additionally, there is a Ministry of Overseas Indian Affairs that was originally a bureau within the Ministry of External Affairs but eventually branched out in 2004 to be an independent Government Agency that seeks to connect the Indian diaspora with their homeland;
- Citizenship Attainment Avenues - The establishment of (i) The Overseas Citizenship of India (OIC), and (ii) The Persons of Indian Origin (PIO) program serves to offer the Indian community in the diaspora a platform to register for citizenship. These platforms convey to Non-Resident Indians (NRI) the rights to live and work in India and eventual citizenship, though under strict guidelines;
- Socioeconomic Organizations - The Indian diaspora with assistance from the government has set up highly organized, well-funded and professionally managed groups abroad. These organizations help tackle issues such as the development of unique projects to provide (i) health and education facilities back in India, (ii) advocacy skills, (iii) business and professional networks, (iv)media outlets, and (v) societies for the promotion of the Indian culture, language and religion. An example in the US, set up by the Indian diaspora and the Government of India, is The Indus Entrepreneurs which was formed in Silicon Valley in 1992 and currently has 11,000 members. This organization forms a connection between the United States of America and India and further promotes entrepreneurship through education, mentoring and networking;
- Investment Education and Consultancy Services - The Indian Government facilitated the establishment of The Overseas Indian Facilitation Centre in 2007, which serves to provide investment education and facilitate business services to Non-Resident Indian (NRIs) and Person of Indian Origin (PIOs). This platform receives a lot of support from Knowledge Partners, which are firms specializing in (i) foreign investment consulting, (ii) regulatory approvals, (iii) market research, (iv) joint venture partner identification, (v) project financing, (vi) accounting, (vii) taxation, (viii) legal, and (ix) portfolio investments;
- Customized Financial Solutions - The Indian government, in order to stabilize the Indian Rupee, have always built up reserves, and diaspora remittances contribute a big part of it. Due to this the government worked in conjunction with commercial banks in the creation of attractive savings account schemes available exclusively to NRIs. Such accounts offer higher interest rates and offer the option of being denominated in foreign currencies. The Government has also facilitated the increase in investments from Indian Diasporas by amending banking regulations to be less stringent on the diasporas;
- Diaspora Bonds - In 2012, Indian banks held USD 68.0 bn in deposits from the Indian Diaspora and in periods of economic instability, the government has issued diaspora bonds to control the overall balance of payment position. Since 1991, the Indian Government has issued 3 bonds raising a total amount of USD 11.3 bn.
Compared to India, we are behind in setting up policies and processes that will help address the challenges facing the diaspora. Engaging the diaspora should be a priority in order to tap into the vast opportunities that the diaspora have to offer; especially in an emerging market like Kenya that is desperate for funds, skills and ideas. The Kenyan Government can support the diaspora by:
- Formulation of investment friendly policies The Government should work in close conjunction with banks to allow for favorable accounts for diaspora, which will encourage them to remit more money back to the country. Such accounts should offer preferential rates for those in the diaspora and should ideally be foreign exchange accounts;
- Issuing Diaspora Bonds The government should start issuing diaspora bonds to raise funds. As seen in India, Diaspora bonds are proving to be attractive avenues through which Governments can raise capital. The Kenyan government is behind on its budget financing, and also has a worsening foreign exchange reserve, and hence should consider diaspora bonds as an alternative fund raising channel;
- Setting up overseas diaspora facilities in order to improve on the relationships and engagement with the diaspora, the Kenyan government should set up overseas facilities abroad for the diaspora. These facilities should serve to promote the Kenyan Culture and educate on the different investment avenues the diaspora can invest back in Kenya;
- Establishment of Organizations In order to encourage skill transfer back home, as well as maximize on the intellectual capital of those Kenyans in the diaspora, the government should work to establish centers which allow for consultation on global best practices and institutionalization efforts which have been successful in the developed markets.
- Support of financial institutions and businesses trying to get the diaspora to invest back home
However, as we await the above to be implemented by the Government, it is important to recognize the initiatives that have been put in place to improve the engagement of the diaspora. Some of the initiatives put in place include:
- Dual Citizenship - Under the new constitution, dual citizenship is allowed and this provides an important link between Diasporas and their home countries. Citizenship and residency rights are important determinants of a diasporas participation in trade, investment, and technology transfer with its origin country and make it easier to travel and own land;
- Voting Rights Kenyans in the diaspora are given voting rights without coming back to their home country, which in turn goes a long way into cementing the relationships and political inclusion;
- Kenya Diaspora Policy The Government has developed a Policy in recognition of the need to engage the Kenyan Diaspora into our national development process in line with the aspirations and goals of the Kenya Vision 2030. The Kenya Vision 2030 acknowledges the Diaspora contribution as a major contributor to economic growth and the achievement of our vision of being globally competitive. Furthermore, Diaspora Diplomacy is now one of the main pillars of the Kenya Foreign Policy.
Kenya has over the past 5 years witnessed a shift in the contribution to foreign exchange with diaspora remittances emerging as the top earner.
The Government should however realize that the contribution to Kenya from the Diasporas goes beyond remittances and should formulate policies and initiatives that serve to mobilize all forms of remittances that have a lasting effect on the economy and the socioeconomic development of its people.
We are working to position Cytonn Diaspora, our diaspora investments mobilization affiliate with offices in DC Metro area, as the leading private diaspora investment platform. Once established for Kenya, we will scale the platform to other countries with significant numbers of citizens in the Diaspora.
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Disclaimer: The views expressed in this publication, are those of the writers where particulars are not warranted- as the facts may change from time to time. This publication is meant for general information only, and is not a warranty, representation or solicitation for any product that may be on offer. Readers are thereby advised in all circumstances, to seek the advice of an independent financial advisor to advise them of the suitability of any financial product for their investment purposes.
