Published on People Move

Innovative financing through migration and remittances

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Perhaps one of the earliest utilitarians was Charvak (his name literally means "sweet talker" in Sanskrit) who a few centuries ago said, "live happily as long as you live/drink a lot of ghee, and borrow if need be!" Now in the thick of a financial crisis marked by excessive borrowing and lending, one might argue against the Charvak Doctrine. It's true that debt, like fire, can be dangerous ("Don't borrow, because you will get into debt"), but if managed prudently, it can also fuel new projects, new products, and growth and employment in many poor countries.

Last week we launched a book titled "Innovative Financing for Development." In this book we argue that poor countries need additional, cross-border capital channeled to the private sector to generate employment, growth, and poverty reduction. For that, innovative financing mechanisms are necessary. The volume brings together various market-based innovative methods of raising development finance including securitization of future flow receivables, diaspora bonds, and the role of shadow sovereign ratings in facilitating access to international capital markets.

While diaspora bonds (both as financial instruments, and as "ties" with the diaspora) are obviously linked to migration, the chapters in the book explain that (a) properly accounting for migrant remittances can significantly improve sovereign ratings; and (b) future migrant remittances can be used as collateral to further lower the borrowing costs and increase the tenor of loans.


Dilip Ratha

Lead Economist and Economic Adviser to the Vice President of Operations, Multilateral Investment Guarantee Agency, World Bank

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