With Sanket
In addition to the temporary protected status and facilitation of remittances - see my earlier post, when government offices and banks resume functioning, Haiti could usefully tap its large diaspora's wealth for the reconstruction of community infrastructure and social projects. This could be done via the issuance of "diaspora bonds". By diaspora bond, I mean not only bonding between the diaspora and the homeland, but more specifically a financial instrument for attracting investment from the diaspora.
In the past diaspora bonds have been used by Israel and India to raise over $35 billion of development financing (see my article with Suhas Ketkar). Several countries - for example, Ethiopia, Nepal, the Philippines, Rwanda, and Sri Lanka - are considering (or have issued) diaspora bonds recently to bridge financing gaps. Besides patriotism, diaspora members are usually more interested than foreign investors in investing in the home country. Not only Haitians abroad, but also foreign individuals interested in helping Haiti, even charitable institutions, are likely to be interested in these bonds. Offering a reasonable interest rate - a 5% tax-free dollar interest rate, for example - could attract a large number of Haitian investors who are getting close to zero interest rate on their deposits.
If 200,000 Haitians in the US, Canada and France were to invest $1,000 each in diaspora bonds, that would add up to $200 million. If these bonds were opened to friends of Haiti, including private charitable organizations, much larger sums can be raised. If the bond rating were enhanced to investment grade rating via guarantees from the multilateral and bilateral donors, then such bonds would even attract institutional investors.
By the way, if you are wondering whether Haitian immigrants are too poor to invest, consider this fact from the Current Population Survey of the US: nearly one-third of Haitian immigrants in the US belong to households that earned more than $60,000 in 2009. In comparison, less than 15% of the immigrants from Mexico, Dominican Republic and El Salvador in the US had that level of household income. A quarter of Haitian immigrants, especially women, are reportedly in the relatively higher paying health care and education sectors; only a small number of them are in the construction sector.
Credit enhancement would be necessary for Haitian diaspora bonds. My preliminary calculation suggests that a $100 million grant from official (or private) donors to guarantee such bonds (say, for 10 years, on an annual rolling basis) could actually generate $600 million of additional funding for Haiti! Such a guarantee structure could reduce interest rates on these bonds from over 15% to below 5% at the going rates. Also marketing diaspora bonds in the US would require a temporary exemption from SEC regulations; perhaps a tough sell, but well worth it under these extraordinary circumstances.
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