Diaspora economic engagement and innovation

Diaspora communities play a pivotal role in providing economic support to their countries of origin through various means such as remittances, investments, and grants, often surpassing the levels of international aid. These financial streams are essential for ensuring access to education, healthcare, and supporting local businesses, which, in turn, generate employment.

Recognizing the significant impact of diaspora economic engagement and support at community and household levels, DRC works to further maximize this impact by addressing the challenges to existing practices as they are felt by those involved – from within the diaspora and from the communities and households at the receiving end.

Diaspora remittances

Remittances from the diaspora to family members in their countries of origin are vital for meeting basic needs, funding special occasions, handling emergencies, and even starting businesses. These funds are crucial for the survival and resilience of households, ensuring access to health services, education, food security, and savings or investments.

DRC recognises the significant efforts and sacrifices made by the diaspora to sustain these financial flows. Despite challenges such as anti-money laundering regulations and banking hurdles, members of the diaspora send money regularly, often at the expense of their own financial stability. This consistent support has a lasting impact, but many feel frustrated that their contributions haven't resulted in sustainable change.

Diaspora remittances, investments and business engagement are a vital economic lifeline, often exceeding international aid in total impact. These funds support education, healthcare, food security and small business investment, directly impacting the lives of one billion people worldwide. Diaspora giving also supports local initiatives such as schools and health clinics.

DRC is committed to strengthening the positive impact of diaspora engagement, with a focus on job creation for refugees, IDPs and host communities. DRC aims to maximise the benefits of these economic contributions for sustainable development and community resilience.

Diaspora business engagement

Diaspora entrepreneurs are supported to set up or invest in local businesses in their countries of origin, thereby promoting local job creation. This support includes training and coaching on entrepreneurship, national legislation and investment processes, as well as the sharing of best practices. Access to investment capital is facilitated through financial institutions in both the diaspora's country of residence and the country of origin. In fragile contexts, diaspora investment often represents a significant proportion of foreign investment, as other investors may prefer more stable economies. Different models of diaspora investment include individual investment, direct involvement in existing businesses, or organised group investment.

DRC has observed varying degrees of success in diaspora business investment and engagement, as the skills, the local knowledge, or the local contacts and connections may not always be sufficient to ensure success in a business venture. However some larger investments turn out successful.

Diaspora economic engagement at community level

Diaspora financial support for community-led initiatives is widespread and an area of exploration for DRC. Engagement can include refining community processes for prioritising diaspora support and potentially matching diaspora contributions to local initiatives. Current (2024) activities around diaspora economic engagement and support are ongoing in Ethiopia, Lebanon, and Mali. Diaspora groups, often organised through hometown associations or kinship lines, provide essential funding for local initiatives. Fundraising within diaspora communities supports emergency responses through cash transfers to trusted local partners and longer-term crisis support, including the construction of schools, boreholes and clinics.

Diaspora Business Entrepreneurs video series

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DRC activities

Research

In spite of the size and propagation of diaspora economic engagement at household and community levels in diasporas' countries of origin, the effects at local level and the modalities used between diaspora and households and communities are generally poorly documented. For design of interventions and in order to avoid harming or usurping the essential flows, DRC is committed to always conduct a piece of research at the local level before any programming can start.

Sharing best practices

Diasporas can support relatives to use their remittances to become self-reliant. This is typically done through social media platforms that are commonly used within diaspora networks and between diaspora and relatives.

Topping-up of remittances to encourage productive use

This is a simple set-up whereby recipients of remittances can apply for a top-up to their remittances from DRC, to start up a small business. It works as a tri-partite agreement between the recipient (contributing 10% of the investment), the sender of remittances (40%) and DRC (50%). Apart from the 50% top-up DRC provides training and coaching to the businessperson.

Remittance based credit

The basic idea is to allow senders and recipients of remittances to convert small monthly transfers to a larger business investment by using the track record of remittance sending/reception as collateral (together with a loan guarantee) for a loan. Once the business is profitable, the loan is repaid through those remittances they would have received anyway

Support towards diaspora businesspeople

Diaspora businesspeople who want to partner, or invest, in existing local companies, start up their own business in country of origin, or otherwise engage in ways that can support local job creation is the target group for this component.

The activities have so far included training and coaching on entrepreneurship, national legislation, and processes for investment/engagement.

Diaspora financial support to community initiatives

It is a widespread practice for diaspora groups /associations to mobilize funding in support of community initiatives in countries of origin. DRC is yet to do any programming to actively support such initiatives but is currently being explored as another type of engagement for DRCs diaspora programme. This could include top-up of diaspora contributions to community development initiatives.