Diaspora bonds and their application in national development

Abstract

Diaspora Bonds are bonds issued with an aim to tap into Diaspora income flows. These bonds allow the issuing country to mobilize resources in the time of financial crisis or when external funds are either not accessible or come at a high price. Due to the nature of these bonds, the yields on these bonds are generally lower than those paid on US treasury bills. Diaspora bonds have been successfully used by Israel since 1951 to fund its development and by India since 1991 at three instances to raise a total of close to $15 billion. Diaspora Bonds mobilize greater resources than donations while at the same time having a positive impact on the countries sovereign credit rating. On comparison with the other similar instruments, which are foreign currency deposits or FCDs, the latter can be withdrawn at any time and hence have limited application as a source of long-term financing. In this report, we have looked at how Diaspora are a valuable asset for the country of origination. We also look at ways in which the diaspora can play a part in the development of the country of origination. We focus especially on Diaspora bonds as a means of mobilizing funds and then go on to study the factors affecting bond issues. In the subsequent part, we see how our nation's need funds to invest in long-term infrastructure development projects and how Diaspora bonds could be an ideal source of funds for such projects. For this report, we have drawn on the research and studies conducted by various scholars and institutions and based on this information, added our own insights and analysis.