Time to develop diaspora bonds

Remittances account for over 8% of Bangladesh’s economy. In common with other developing countries, they have long far outweighed foreign aid. The $15 billion sent home last year by Bangladeshis working abroad provides a bigger single net inflow of foreign currency than export industries. Bangladesh Bank estimates remittances are responsible for two-thirds of the country’s growing foreign exchange reserves. As well as being an invaluable source of sustenance for millions of families, they drive a significant proportion of private consumption and property investments. Experience shows their biggest advantage is reliability. While amounts sent change from month to month, the overall trend is of upward growth which has continued to flow through both good and bad economic climates. The goodwill and family ties represented by these remittances offer considerable potential for expansion. In particular, expatriates and people with ancestral links, whose families don’t need regular support in Bangladesh, may have a greater desire than non-Bangladeshis to invest here. New research by the the World Bank’s Migration and Remittances Unit confirms investors with a personal link to a country are often happier than other outsiders to take risks in local currencies or at lower yields. While experiences vary, China, India, and Israel have hugely managed to stimulate foreign investment by creating special investment vehicles and opportunities for diaspora communities. The government should emulate such efforts by exploring the potential to develop bonds for remittance senders. For a large part, this means building the  trust and confidence that are key to attracting investors, whatever their nationality. If this is achieved, it can also encourage other means, such as bank accounts, and pension funds, as vehicles for attracting investment. Developing new financial instruments to attract new funds for infrastructure development could prove both helpful for the economy and be attractive to overseas Bangladeshis alike.