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Diaspora bond. Remittances

De-risking and remittances: the myth of the “underlying transaction” debunked

Marco Nicoli's picture
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Societé Genérale Mauritanie bank branch in Nouakchott, Mauritania.
Societé Genérale Mauritanie bank branch in Nouakchott, Mauritania. ©️ Arne Hoel

This Saturday, June 16, we celebrate International Day of Family Remittances to recognize “the significant financial contribution migrant workers make to the wellbeing of their families back home and to the sustainable development of their countries of origin.”

Which is why it is the perfect time to talk about a trend facing remittance service providers who migrants rely on to transfer their money across borders and back home.
In recent years, the international remittance services industry has been subject to the so-called “de-risking” phenomenon. Banks believe that anti-money laundering and counter financing of terrorism (AML/CFT) regulations and enforcement practices have made serving money transfer operators (MTOs) too risky from a legal and reputational perspective. For banks, the profit of serving MTOs is not considered sufficient to justify the level of effort required to manage these increased risks.
 

"Homeward Bond" - New York Times Op-Ed on diaspora bonds

Dilip Ratha's picture

The New York Times published an opinion piece on diaspora bonds over the weekend. In this piece, Ngozi and I highlight the potential for mobilizing diaspora wealth for financing infrastructure investments in Africa and other developing regions.

At a time when donor countries are facing fiscal difficulties, new sources of funding and innovative ways to leverage available donor funding are required for meeting the financing needs in developing countries. Indeed, innovative mechanisms for channeling investments to dynamic developing countries may even provide a way out of weak demand and excess capacity prevailing currently in the developed countries. As highlighted by Justin Lin, "a global push for investment along the line of Keynesian stimulus is the key for a sustained global recovery; however, the stimulus needs to go beyond the traditional Keynesian investment....By far the greatest opportunities for productivity-enhancing investments are in developing countries..." (see here ).