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8/9/2019 Diaspora Bonds: The African Experience
1/22
The AfricanDevelopment Bank
Group
DIASPORA BONDS:THE ARI!ANE"PERIEN!E
A#DB orum for Promotin$Remittance# for Development
inance
8/9/2019 Diaspora Bonds: The African Experience
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O+ER+IE, O DIASPORA BONDS
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3
What is a Diaspora Bond?
Diaspora bonds tend to be fixed interest rated and redeemable at predetermined
maturities to finance development or cover long-term deficits, paying interest coupons
during the life of the bond.
Diaspora bonds can be defined as “…a debt instrument issued by a country – or,
potentially, a sub-sovereign entity or even a private corporation – to raise finance from
its overseas migrants” (atha and !et"ar, #$$%&
A bond is a debt security instrument with an original maturity of more than 1
year, usually tradable in financial markets.
Diaspora bond issuance can therefore demonstrate diversified resource mobili'ationavenues and thus serve as a ris" management strategy to limit debt fatigue) by
creditors or cro*ding out among traditional lenders.
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African Diaspora in umbers
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
South Africa
East Africa
Central Africa
West Africa
orth Africa
!otal
"e#ittancesto Africa as %
of $&
'(ei)hte*+
ri)ht a,is-
-SD Billion . GDP
egional emittance +rends in frica (#$$-#$&
/ource0 frican 1conomic 2utloo", fD3
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African Diaspora in umbers
pprox. 4$ million fricans are living
outside the continent…but frica remains
the primary destination of most frican
migrants.
!ape "erde has the #th
highestproportion of migrants
relati$e to its population at
3%.&'
igerian (emittances)
*+D 1 billion
-migration rate of
tertiary educated
population '/ 01
(wanda)
0'
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Diaspora +a$ings $s. (emittances
Dia#poraSavin$#
Remittancelo/#
Source Sain)s Sain)s
Recipient /nstitutional/nestors
ousehol*s
-#e ofProcee0#
/nest#ent Consu#tion
Opportunit1
on* issuance Securitiation
Interme0iar1
Soerei)ns'usuall-
'&riate- inancial/nstitutions
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Diaspora Bond 2ssuance
D2A+4(A
2"-+54(+ 6(47
!4*5(8 9
7A(:-52; AD
D2+5(2B*524
-5W4(: <
=A!-7-5 A;-5
D2A+4(A
B4D+
2++*-(
A524A=
(4>-!5 2
2++*-(
!4*5(8
+-55=-7-5 AD
!=-A(A!-
Bondholder
repayments if
proect bond
Bondholder
repayments if
-urobond
o f f
s h
o r
e
o n s h o r e
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ARI!AN !ASE ST-DIES
8/9/2019 Diaspora Bonds: The African Experience
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!ase +tudy ;hana
+entimental Approach
5n #$$6, 7hana launched its
7olden 8ubilee /avings 3ond to
commemorate its 9$th
anniversary of its independence.
0%: Amount: ;/D 9$ mln: CCY: 7ixed(annuali'ed yield
4.?%@&: +arget0 7hana A
7ermany, =anada, ;/: 6eatures) & bps
premium on return to
retail in$estors C ta
“The government recognizes that
the Golden Jubilee celebrations
must not only be reflective but
should be used as a latform todefine the develoment agenda for
the ne!t "# years$
% &'ad'o (aah)*iredu+
former ,inance and -conomic
.lanning Minister
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!ase +tudy -thiopia
7andated Approach
0#: Brivate sector
instrument: Cillennium =orporate
3ond: Amount: ;n"no*n: CCY: ;/D 1;
other convertible
currency: Tenor: 9, % and $
years: Return: >ixed rate of
011: =hange to sovereign
instrument: “7rand enaissance
Dam 3ond”: Amount: /till
un"no*n: CCY: ddition of 3irr
: Tenor: ange of 9-$
years: Return: change from
:ey factors) patriotic discount C domestic/
go$ernment EpolicyF
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!ase +tudy :enya
-mbedded Approach
011: Amount: !1/ #$
billion (rated 3A&: Tenor: # years
: Features0 =isted onthe +-E tax exemptE
only publicly offered in
!enyaE reFuired
opening of =D/account *ith central
ban": Diaspora Element: +ap
!ountryGs fifth infrastructure bond
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10
!ase +tudy igeria
ragmatic Approach
%
01&H?
: Amount: *+D 3 million: o onshore portion: 7=As) +tanbic 2B5! and
;oldman +achs
Jigeria *ill register its Diaspora
bonds on the ;/ /ecurities and
1xchange =ommission (/1=&.
Reali#tic !omparatorNi$eria
Euro2on02011 S 500 n 10 ears i,e* 6.75%
&riate
lace#ent
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3ESSONS 3EARNED
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1I
=essons =earned J .rearation
Is there a need for a
Diaspora Bond
specifically?
5s the Diaspora
eachable
Is there a Critical ass of
!ol"ent Diaspora?
Can the Bond Issuance #e $roperly anaged?
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Dia#pora
Bon0
Soverei$nI##uer 4!entral
Government
3ocal 2ank#an0 local5nancial
in#titution#operatin$
a2roa0
Dia#pora%e0ia Outlet#
!ivil Societ1Or$ani6ation#4 A##ociation#
Autonomou# 4private
Dia#poraa$encie#&
companie#
%ini#tr1 oforei$nA7air#&orei$n
Em2a##ie#
1&
=essons J Mar/eting 0 1istribution
!reate a serious, well funded and legitimate network
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1
=essons =earned J .ricing
A bond is still a financial in$estment K do not bank on the patriotic discount
1motional affiliation does not eliminate the need to ma"e a financial return 5srael, bonds)
high yields, competitive *ith other investment choices.
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1%
=essons =earned J Timing
2ssue when rallying power is highest K times of national oy or pain
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!ON!3-SIONS
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1@
2nno$ati$e Alternati$es
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0
(ole of 7DBs L D62s
!losing the gap in
numbers
+5*D2-+ <
+5A52+52!+
2ncrease the trust and
transparency factor
!4J62A!2;
(aise funding to on lend
to specific country
portfolios
(498 2++*-(
1 0 3 I
AD"2+4(8
=e$eraging practical
eperience in capital
markets
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01
:ey 7essage
MThe minimum condition is% of course% the diaspora has to feel that there is enoughcredi#ility of the #orro&er on the other side and the money &ill #e used properly and that
the money &ill #e paid #ac' in the end() J (atha
The money loc'ed a&ay in the #an's here% in foreign countries% can #e used to de"elop
*hana( But &ould migrants #e interested in #uying diaspora #onds if they &ere issued?
+I &ould #uy a #ond if I could, -part &ith some money I &ouldn.t need immediately #ut
can #e put a&ay for such purpose)(
JJNannah ApeahJ:ubi JJ ;hanaian resident in *: for 0@ years
-If the money is going to #e channeled into areas "isi#le% that &e can see% not /ust li'e
the other type of money that comes in and is #eing hi/ac'ed from indi"iduals% then
definitely people &ould #e &illing to #uy the #onds()
JJ>oseph Alaemba, ational Association of igerian !ommunities in the *:
B*2=D2; 5(*+5 2+ 5N- 74+5 274(5A5 6A!54(
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THAN8 9O-or further inuiries lease contact
Trea#ur1 Anal1#t:n#pio;$ar2rah