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Innovative financing through migration and remittances

Dilip Ratha's picture

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.

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Submitted by rajesh on
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. i think these two points explain all the thing

Dilip, I will read (devour) this book as soon as I get it in my hands. Here's why. Crowd VC's mission is to connect Internet ‘crowdfunding’ with ‘localized’ capital markets in the 58 or so Least Developed Countries (LDC) of the world. We want to create what we call “Patient Capital Markets”, to bring to life the grassroots ideas of entrepreneurs and change-makers for the development of their economies and society, and at the same time help wean their economies off aid and charity dependency and start to build the capacity and resources to participate effectively in ‘local’ and global markets. We are building a Community Powered Capital platform which is pluggable for each of the 4 major types of funding source alternative - pledge, lending, revenue-share and equity models, plus several difference types of payment gateway including M-Pesa, Orange Money, Bitcoin and more. We also will include different payment gateways which are non-monitory (i.e. work effort and contribution), to boost participation of the community. One of the goals of the Crowd VC platform is to develop ‘smart capital’ by offering a method of repatriating funds earned abroad by each country’s Diaspora and of transferring that capital (net receipts from abroad) at no or ultra low cost. It has been shown by Dambisa Moyo that if transfer costs (or losses) could be halved, external net receipts into each country would approximately double. Via the Internet, by building this community of the new generation now external to the place they once called home, we can offer them to the chance to find out about and contribute to their family and friend’s welfare; an opportunity to participate in their own Nation-building; and at the same time save themselves money, so that more of their income earned abroad can find its way home at no cost to them. So while the whole idea of reaching out to the masses through crowdfunding is exciting and trendy, and new connections can of course be formed, the numbers prove that mobilising existing communities to continue to step up and get involved will be more than adequate for most entrepreneurs to start reaching their goals. In this way we believe we can promote grassroots innovation, foster sustainable development, help businesses grow and economies to thrive in most, if not all of the Least Developed Countries. The plan is for Crowd VC to be an open-source platform provided free as a hosted SaaS solution on our servers, or as an easy download and install on your own server. The platform will launch in November in 15 of the 26 National languages of Africa, have federated project-flow between same language sites, and operate together with partnerships we are developing at The Robert Owen Institute, AKVO and Grow VC and later we hope, the Honey Bee Network, World Bank, IMF, and many of the the major NGOs. Hopefully we will be able to work together on this project. Terence.

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