diaspora bonds: the african experience

8/9/2019 Diaspora Bonds: The African Experience

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The AfricanDevelopment Bank

Group

DIASPORA BONDS:THE ARI!ANE"PERIEN!E

A#DB orum for Promotin$Remittance# for Development

inance


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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


9/22@

!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

diaspora bonds: the african experience

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