Diaspora remittances vital for economy

Wednesday, October 18, 2017

The government’s efforts to harness diaspora remittances have a lot to commend it. This is an area that has remained largely untapped so far, despite tangible evidence that when properly explored, remittances could transform the country’s fledgling economy. 

In 2016, remittances contributed 22 per cent of The Gambia’s gross domestic product (GDP). The Gambia is not the only African country where migrant remittances have become an important part of the economy. Officially recorded remittance flows to Africa by the World Bank had increased from US$9.1 billion in 1990 to nearly US$40 billion in 2010.

The Gambia, like other African countries, relies heavily on external funding for development. But foreign direct investments and official development aid have declined over the years, according to the African Development Bank (AfDB).

However, development experts believe remittance flows can help reduce poverty and grow the economy. 

With the contribution of 22 per cent to the GDP, remittances are an important share of foreign reserves for the country, but their impact on development and economic growth are minimal because most of the remittances are only spent on consumption. Maybe, there is the need to consider reserving some investment sectors for diasporans. They can also be encouraged to invest in infrastructure development.

African governments that were in a similar bad economic situation like The Gambia had fashioned out a way to get migrants to invest part of their wealth in their homeland in the form of diaspora bonds. The capital raised through the bond is used for big development projects.

Rwanda had a more successful outcome. When Rwanda’s major donors suspended aid after the UN accused its government of backing rebels in the DR Congo – a charge it denied, Rwandans living internally and abroad, as well as “friends” of Rwanda, were called upon to donate to a “solidarity fund”.

By August 2012, the fund had attracted pledges of about US$31 million, according to The Guardian, a UK newspaper.

Issuing diaspora bonds and turning remittance flows into bonds or instruments that can be sold to investors are good alternatives to borrowing from the international capital market, says the AfDB.

In essence, a closer look at remittances in other countries shows that with proper policy and strategy, The Gambia can reap more from the diaspora. 

This is why we support The Gambia government’s initiative to implement a diaspora strategy that facilitates and harnesses the contribution of the diaspora beyond merely the finances and skills of individuals. The strategy establishes a diaspora directorate and allocated a month to celebrate the country’s diaspora as well as initiative to reduce the transaction cost of the remittances to a maximum of 3 per cent.

With this strategy, when effectively implemented, The Gambia can leverage on the huge number of Gambians living abroad. They can contribute positively to the development of the country.

There is growing recognition that migration, if managed properly, can positively contribute towards national development.

“We need to tap into the yet to be fully untapped diaspora investment potential”

The Point