Pakistan’s diaspora bond

A comment on recent diaspora bond interest.

The article by Farhan Bokhari on the diaspora bonds by Pakistan, while bringing much needed attention to the potential of national diasporas, cites $21bln in remittances sent by Pakistanis abroad to their families back home. Unfortunately, this just repeats a common misunderstanding of diaspora, its potential, and possible success of a diaspora bond.

Unfortunately, temporary migrant workers who send the remittances can hardly pass for the larger financial donors needed for a successful bond issue. As such remittances flows cannot  be the sole determinant of the diaspora bond’s success.

By definition, remittances are individualistic going from a sender to a very specific family. These transfers are motivated by the specific household’s needs and working migrant’s abilities to generate sufficient earnings. A diaspora bond is a more complex international capital markets instrument requiring a long-term investment with bond prices significantly above typical labor migrant’s transfer to family. Of course, if a government issuing a diaspora bond can overcome these limitations it may still tap into this new diaspora made up of migrants.

However, in a probable successful scenario the key investors would be composed of the old diaspora, i.e. those with the sense of ethnic belonging but integrated in the host society on a more solid footing by either income or generations of expat life.

There are other proposals for engaging labor migrants’ potential, which should not go undiscovered, including a Migration Development Bank (as we propose here and a shorter write up here). This is true for Pakistan and others with large diaspora, including the post-socialist economies of Eastern Europe and former Soviet Union.

Aleksandr V. Gevorkyan // agevorkyan.com

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