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Diaspora Investment in Agriculture - GC PTA side event, 22 February

Posted by Dimitra Thursday, February 23, 2012

The immense development potential of diaspora catalysed an animated discussion at the PTA GC side event on 22 February, led by the Financing Facility for Remittances (FFR). Despite the late hour, delegates gathered numerous to learn how two of the most proactive FFR partners – the Atikha Overseas Workers and Communities Initiatives and the Himilo Relief and Development Association (HIRDA) – turned a small group of strong-willed and talented returnees into an investment cooperative.

Remittances reach 10 per cent of the developing world’s population. Approximately 40 countries receive 10 per cent or more of their GDP from remittances. In some countries, such as Tajikistan, remittances account for 30 per cent of GDP, while this number is higher still in Haiti and Somalia, where estimates range from 30 to 50 per cent. Nearly half of these vital flows reach rural areas, where they help purchasing food, building shelters, and funding children education. Yet, just alike each of us, migrants and their families do save up for educating their children or to be able to face unexpected health issues, or simply for rainy days.

“Migrants behave just the same as we do” says Mai Anonuevo, the manager of an FFR-financed project in the Philippines. “They, too, look for saving and investment opportunities, and of course they seek to reduce risk as much as possible”. Most importantly, “Migrants’ investment decisions are always based on family or community ties rather than pure profit seeking. This is why no one is more keen on investing in the home countries than the diaspora actors” adds Fatumo Farah, manager of the FFR-financed project in Somalia. It is indeed remarkable to learn, through Fatumo’s passionate words, how, in a few years, a returnee community in the central region of Somalia managed to take control of a water extraction system established through external donors’ contribution. Returnees decided to invest their own savings in maintenance and water distribution. Now, the locally-managed structure is self-sufficient and fully functioning through the payment of an equitable fare by users covering maintenance costs.

Why do migrants choose investing in agriculture? Just as HIRDA, Atikha, and many of the FFR partners in the field have explained, agriculture offers a relatively safe and stable financial return and the prospect of job creation in the home country. Not to mention the relevance of the “nostalgic goods” market, in which migrants abroad are willing to pay a premium price just to get hold of their home specialties, be it camel milk for the Somali community in the Netherlands or nopal cactus – derived products for the Mexican community in the USA.

How does IFAD, through the FFR, engage migrants into investing in agriculture in their home country? Again, the FFR experience in the Philippines has demonstrated the importance of working together with migrant workers towards goal setting, budgeting and saving, and providing them with the access to the right and equitable instruments to do so. On the other hand, it has brought to light the key role played by local cooperatives as instruments to pool savings and reduce investment risk, through accurate mapping of existing investment opportunities. Working with local governments has also been key to help create an enabling environment for investment and economic development, as well as mobilise public resources to match migrant capital.

So what are the next steps? The FFR-led Diaspora Investment in Agriculture Initiative (DIA) seeks to scale up successful migrant investment examples and to turn them into a profitable, pro-poor mechanism for agricultural development. Through DIA, country-specific value chain of selected agricultural commodities will be mapped, along with investment opportunities and capacity building needs, all in close cooperation with local partners from the private, public, and civil society sectors. Through the launch of a competitive call for proposals, a number of successful initiatives will be identified, that address key priorities emerging from the country analysis. Selected proposals will have to demonstrate how to engage closely with local communities and mobilise matching financial resources to share risk.

As a matter of fact, while migrants become more conscious about their goals and financial options, diaspora investment in agriculture is already happening, and growing fast. “We used to migrate to survive. Now, we migrate smarter. We have one objective – save and return better” told once one of the FFR grant beneficiaries, an Albanian would-be entrepreneur. The next big challenge will thus be on how to capitalise on a growing phenomenon, while building overseas bridges between diasporas abroad and their home communities.