Immigration Canada: Diaspora bonds could help developing countries

BY MARC AND CRAIG KIELBURGER, TIMES COLONIST JANUARY 22, 2012

In 1988, Naser Kaid left his home in Jimma, Ethiopia, to seek opportunity in Canada. His widowed mother stayed behind. Today, Kaid is her only lifeline.

What Kaid can afford from his wages as a Toronto taxi driver, he sends home to his mother. It's usually $50 to $100 each month and the only income she has. In November 2011, she needed surgery. Kaid scraped together the money to cover the operation. He considers it his responsibility.

"Life is hard here," Kaid says. "But at the same time, you have to remember those elsewhere."

In 2010, immigrants to Canada sent more than $12 billion to support the families they left behind. That's $4 billion more than all the money Canadians gave to charity, and over $6 billion more than Canada spent on international aid that same year.

When the world population passed seven billion in October 2011, the UN Population Fund dedicated an entire chapter of its State of the World Population report to issues around migration. It noted the absolutely staggering amount of money immigrants around the world send back home.

The World Bank estimates that, by 2013, more than $404 billion will be travelling around the world every year from immigrants back to their families. That's almost three times more than all the developed countries in the world put together spent on international aid in 2010.

The Hudson Institute, an American think tank, reports that these remittances play a key role in fighting poverty in developing nations. Those who receive money from family abroad tend to have a better quality of life and are better able to survive shocks like natural disasters.

With tough economic times forcing many donor countries to scale back on international aid, is there a way to turn the hundreds of billions flowing from immigrant communities into an even more effective tool against poverty? Yes, through diaspora bonds.

Canadians should be familiar with Canada Savings Bonds. You buy them from the Government of Canada in amounts as little as $100. When you redeem them months or years later, you get your money back with interest. It's a great way to save money, and it creates revenue our government can use to provide the services we rely on, like health care.

Diaspora bonds work the same way, except they are sold by countries like Ethiopia to their immigrant communities living abroad.

Diaspora bonds are not new. Israel was the first to issue them in 1951. Some African countries like Kenya, Ethiopia, and Nigeria have recently begun to issue bonds. Greek immigrants in Canada and other countries are now looking to diaspora bonds as a way to save their homeland from its massive debt crisis.

The World Bank offers one example of how diaspora bonds could be employed to aid development. There are more than 1.5 million Haitian immigrants living in Canada, the U.S. and France. If 200,000 of them each bought $1,000 in bonds, they would raise $200 million to support postearthquake reconstruction in Haiti.

It seems to us, Canada could support diaspora bonds as a cost-effective way to increase resources for fighting poverty. Here are few ideas that might be explored: Canada could act as an international guarantor for development-dedicated bonds. Our government could help promote these bonds to immigrant communities, or give tax credits to immigrants who purchase them.

There are risks in diaspora bonds. Because the money from bonds goes to governments in developing countries, there is potential for mismanagement or corruption. The Canadian Chapter of the World Council of Hellenes Abroad, for example, prefers that the European Central Bank or the International Monetary Fund control any funds from diaspora bonds. They believe the Government of Greece is in disarray and cannot responsibly manage the money.

Through partnerships, Canada could support bonds designated for specific approved projects. We can provide technical assistance to recipient countries, building their capacity to manage the bonds with accountability and transparency.

We see a creative opportunity with diaspora bonds to not only increase resources for development, but also empower our immigrant communities to help their families back home.

Naser Kaid thinks diaspora bonds are brilliant.

He's considering investing in the new bonds available from Ethiopia.

"It's one of the best ideas," he says. "Countries can use the money, it doesn't cost you much, and you get it back!"