About three weeks and two continents ago I began writing about remittances, those financial transfers from emigrants working abroad to their family and friends back home. I noted that they have a number of advantages over more traditional types of aid (government, foundations, FDI, etc), but suffer from a critical weakness:
They don’t necessarily finance development per se. They may help individual family members purchase important goods and services, but they don’t contribute to the provision of public goods, or to broader social and economic development.
So now, the moment you’ve all been waiting for…
Set up Remittance Funds, that will channel investments from diaspora communities into projects of economic and social value in their home countries. Possible examples of projects in which the Fund would invest could include:
- Renewable energy projects in off-the-grid areas
- Expanding internet access or other telecommunications links
- Funding co-ops for crops
Investments would be open to anyone, but because these sorts of projects have more of a social return on investment than an immediate financial one, they would probably be most attractive to immigrants who have connections to the places where the Funds invest.
So far, I’ve focused on how to get around the weakness of traditional remittances, but haven’t yet shown how we might still capitalize on the advantages thereof. So now let’s discuss an important feature of this Fund:
Investors in each Remittance Fund will have rights rather like shareholders, only more so. That is to say, they will propose and vote on the projects in which each Fund will invest. Assuming that most of the investors are immigrants who still have strong links to their homeland, they will be more informed about what sorts of investments will add value, which are feasible, and how to carry out investments in a way that is sustainable in the target communities.
In this way, investors in the Fund could still have the confidence that they have when sending money directly to family members.
I’m always eager to get feedback on my ideas, and on this one I’d be particularly interested to hear from my friends who are immigrants. Specifically, I wonder: Are remittances to family already too big an expenditure to think about participating in such a fund? If you were to participate in such a fund, would it replace or complement traditional remittances?