When we think about the economic potential of the estimated 215 million international migrants residing in countries other than their country of origin, we tend to fixate on the roughly 350 billion in money transfers sent annually to support family back home — perhaps with good reason. Remittances are a critical financial link between migrants and their family members back home, supporting the consumption needs of households and now these money transfers are increasingly going into savings accounts, towards home purchases and other asset building activities. However, while remittances are typically person-to-person private flows, we are also witnessing investments into small and medium enterprises by a new cadre of entrepreneurs from the diaspora community. Diaspora entrepreneurs are becoming important change makers in their country of origin. Having established themselves in the U.S., these dynamic individuals are now bringing back capital, intellectual expertise and business acumen to start enterprises in their countries of origin. In turn, these businesses are impacting the local marketplace with the introduction of new technology, products and services and business processes that are fostering innovation and enhancing competitiveness in the local economy.
Often outside the focus of the mainstream press, there are many examples of diaspora-driven enterprises as change agents ranging from a technology company utilizing a coding system and SMS technology to combat drug counterfeiting in Nigeria to an environmentally-friendly ferry powered by sunflower oil produced by local farmers in Uganda. At USAID, we have sought to harness this entrepreneurial drive by launching initiatives like the 2010 African Diaspora Marketplace where we partnered with Western Union to launch a business plan competition targeted to U.S. based African diaspora. Skeptics might question the role of a donor agency in providing seed capital and supporting start-up small and medium enterprises; that normally happens in Silicon Valley and not in Washington, DC right? But a paradigm shift is occurring in the development field too.
This year marks the 50th Anniversary of USAID and since the end of World War Two and the creation of the Marshall Plan, the international development landscape has been transformed. It is evident that no single entity, be it a donor agency, large-scale foundation or international NGO – can achieve development outcomes by itself. Over the past decade, USAID has learned that we can better address some of the most perplexing development challenges and have sustained economic development by finding overlapping interests with private sector partners. Diasporas are one of the new partners that we seek to engage with. Diasporas are willing and able to be the change makers in their country of origin or ancestry. The World Bank highlights their untapped potential in terms of the high level of savings of the diaspora communities. In the US alone, diaspora communities saved over $400 Billion in 2010 – about $50 billion of this comes from African diaspora communities.
Diaspora entrepreneurs possess the social connections, cultural and linguistic competence, willingness and resiliency it takes to invest in markets or economies that traditional investors view as risky. Markets that require investor determination and discipline due to lack of transparency, corruption and governmental interference in private enterprise and weak enforcement of the rule of law.
These impediments can be overcome if the country-of-origin governments, private sector, and the broader development community identify ways to strengthen the ecosystem so that diaspora entrepreneurs can thrive. They can benefit greatly from our support.