Leveraging Remittances and Diaspora Resources for a World Free from Malaria

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Malaria remains a significant problem for developing countries and exacts a heavy economic and social cost in terms of lost lives, loss of productivity, and foregone incomes and earnings. Despite significant progress in recent decades, the WHO estimates that there are some 207 million cases of malaria and over half a million people killed annually, with the bulk of these in Africa, mostly among children under 5 years of age. About 3.4 billion people (half the world’s population) are at risk of contracting the disease. Combating malaria is high on the agenda of the international development community (see UN Millennium Development Goal 6 and Roll Back Malaria partnership). Significantly greater resources are needed – an estimated $5 billion annually – for achieving the MDG target of full malaria control in all endemic countries. 

Innovative financing tools leveraging on remittances and diaspora wealth can complement official aid and philanthropic efforts for fighting malaria and other diseases. Remittances sent by migrants to developing countries reached $414 billion in 2013. The African continent received about $61 billion in officially recorded remittances in 2013 (2.6 percent of Africa’s GDP) from over 30 million African emigrants, although the volume of remittances included flows through unrecorded informal channels is believed to be far higher. The annual savings of the diaspora of developing countries are estimated to be in the range of $511 billion, with the savings of the African diaspora at $62 billion. Three potential mechanisms for tapping into remittances and diaspora resources are discussed below.

Voluntary contribution when sending remittances: This mechanism would partner with remittance service providers (RSPs) to offer migrants ways to contribute to malaria control when they send remittances back home. This can be easily implemented by adding a choice for making a donation on the remittance form: "Would you like to donate $1 or more for malaria prevention in the district of residence of your remittance beneficiary?"  If migrants were to contribute $1 twice a year while sending remittances, this can potentially raise $400-500 million annually. Many migrants – especially better-educated migrants in rich countries – are likely to contribute larger amounts depending on the extent of awareness-raising, marketing and partnerships.  Given the malaria prevalence is significantly greater for Africa, African migrants may be more likely to contribute, to the tune of $150 million annually.       

Earmark remittances for paying premiums for micro-health insurance: A second mechanism is to allow migrants to purchase micro health insurance for recipients while sending remittances. A part of the funds raised through insurance premiums could be used for prevention efforts and control of diseases including malaria, which would benefit the recipients directly as well as have significant externalities for the communities of origin.  The advantage of this mechanism is that it would not rely solely on charitable and voluntary contributions, but tap into the altruism of migrants towards their families. It would also be important to ensure reliable and efficient mechanisms for payout of contingent benefits during times of illness.  

Diaspora bonds to raise financing for health projects: Diaspora bonds represent a retail financing instrument with the potential to raised substantial funding from the diaspora for fighting infectious disease. The diaspora are typically more patriotic, have a lower risk perception of investing in their countries of origin, and therefore willing to lend at substantially lower costs and at longer maturities than private investors.* They are also more willing to fund projects in their countries that will benefit both their families and their communities. Since malaria control requires substantial up-front funding and the economic returns are realized over a long period, a diaspora bond would typically require guarantees from international donors or governments in order to be attractive to the diaspora. There is a rationale for raising financing for malaria control via a diaspora bond where the future repayments is guaranteed (or “securitized”) by future aid commitments from multilateral, bilateral or private donors.

Governance mechanisms and partnerships: Credible governance mechanisms for collection, disbursement of proceeds and appropriate use of funds are of critical importance for all three financing instruments that leverage on remittances and diaspora wealth. The diaspora may be more willing to finance malaria and disease control activities in their countries of origin when they have sufficient assurance that the funds will be utilized effectively and in a transparent manner, especially given issues of corruption and inefficiencies in the public health systems in many developing countries. Similarly, there should be transparency and fairness in the choice of beneficiaries of the funding.

Tax exemptions for voluntary contributions by migrants for disease control would encourage them to contribute. Similar tax incentives in the destination countries could be provided for health insurance premiums for disease control that benefit both the migrants’ families and the communities of origin. Tax exemption for diaspora bonds for health could be particularly effective in attracting the wealth of the diaspora. Designing effective tax incentives will require partnerships with and active collaboration of destination country governments. 

Partnerships with reputable institutions with an established track record in funding health sector in developing countries (e.g. Bill and Melinda Gates Foundation) and awareness campaigns for the diaspora would help to mitigate some of these risks.

Partnerships with remittance service providers (RSPs) and destination country governments can help to ensure that voluntary contributions for disease control and for health insurance premiums are not subject to remittance costs that migrants pay when sending money. RSPs such as Western Union, Moneygram, commercial banks, post offices, microfinance institutions, and mobile money transfer providers have a wide networks of agents, including stand-alone outlets, supermarkets, gas stations, retail store etc. that are readily accessible to migrants, including those without documentation.

These will need to be complemented with efforts to raise awareness among migrant communities on the benefits of malaria control. The efforts include reaching out to the diaspora through diaspora associations, community groups, churches, ethnic stores, and ethnic newspapers. 

For details please see linked PDF file.

* India and Israel have raised some $40 billion dollars through diaspora bonds during difficult times and for longer-term development goals (see Okonjo-Iweala and Ratha Foreign Policy May 2011).
 

Authors

Dilip Ratha

Manager, Migration and Remittances Unit and Head, KNOMAD, Global Indicators Group, World Bank

Sanket Mohapatra

Associate Professor, IIM Ahmedabad

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