The tie between the African migrant and home has long been a valuable asset to those on both sides of the divide. In Africa's kaleidoscopic past, movement and separation, while a strain for some families, have also been a source of vitality for others.

Today, there are an estimated 30 million African citizens living outside their countries of birth, and mostly outside Africa. Their  remittances account for billions of dollars of financial flows into sub-Saharan Africa every year, and as economic growth and innovations in information and communication technologies sweep across the continent, new opportunities are emerging to transform these links. Financial systems are tapping and channelling these connections, delivering new resources for development and the means to reverse the brain drain of earlier generations, producing a "brain gain".

Migrants have delivered benefits to their home countries in areas as diverse as trade, human capital, leadership and cultural change, but the fastest growing contribution of emigrants has been remittances. In 1970, formal remittances to sub-Saharan Africa totalled US$23 million, and by 2010 had reached US$22 billion per annum. This increase has been driven in part by growing Diaspora wealth, but also by innovations in financial systems. These include services provided by Western Union, which now has more than 22,000 agent locations across Africa, as well as developments in online and mobile transfer services, which act as a complement to existing infrastructure by extending accessibility to previously underserved populations.  

These flows of capital to businesses and families across Africa supply otherwise inaccessible credit, help smooth irregular income flows, provide insurance against income-shocks and shore up foreign-currency reserves. As such, they are a vital lubricant in the engines of economic development. There is a growing belief in development circles that remittances are increasingly a more dependable revenue stream than FDI and overseas development assistance (ODA). The latter two income streams are sometimes viewed to be uncertain and 3-5 times more susceptible to external shocks than remittances. And with several bilateral donors, such as Britain, changing their development assistance outlook to focus only on fragile states and severely poor nations, middle-income countries may have to adjust to rely more on remittance income.

However, the landscape of migrant finance is in a phase of development itself, with Diaspora Bonds poised to become a key driver in its evolution. As government bonds purchasable by a country's citizens living abroad, Diaspora Bonds are a key source of capital and foreign currency for the state. The concept of Diaspora bonds is over 80 years old and was first practised by the Japanese and Chinese. Today, other nations can boast successes including the State of Israel whose bond is often used as an example of how much can be mobilised. Over 30 years, the Israeli Diaspora Bond raised US$25 billion.

The World Bank estimates that US$5-10 billion could be raised by Diaspora Bonds in sub-Saharan Africa. Ethiopia led the way by issuing its first bond in 2008, whilst in several other African countries the possibility is being eagerly discussed.  For example, in Kenya and Ghana, Diaspora inflows exceeded US$1.8 billion and US$626 million respectively in 2010. Diaspora Bonds not only supply a source of capital, but blaze a trail by galvanising relationships between citizens abroad and their homeland. Buying government bonds allows citizens to reaffirm their national identity, and, as a means for the Diaspora to invest and contribute to development in a formal and structured way, this activity carves out a new role for citizens who emigrate.

The potential of securitisation of key receivables such as remittances in low income African countries remains untapped for a few reasons mainly to do with capacity. Currently, financial sectors are considered weak and experience in international banking and the design and implementation of complex instruments such as the securitisation of future flows is lacking.
There is also a low capacity to enforce contracts and protect creditors.

Nonetheless, the growing number of Diaspora investment groups and forums is indicative of the African Diaspora's increasing willingness to invest in the continent's emerging economies.

Map copyright 2010 by the Migration Policy Institute

As platforms for the exchange of ideas, knowledge, experience and information, these forums are a means for Africans in the Diaspora to explore business and investment opportunities in their countries of origin. Growing numbers of entrepreneurs are returning to the continent, bringing innovative business ideas with them.

The African Diaspora Marketplace (ADM) initiative which is jointly funded by USAID and Western Union aims to facilitate this entrepreneurial flow by matching business talent and ideas with the necessary funding to bring them to life on the continent.

Last year the 14 ADM winners who hailed from seven African countries each received grants of US$100,000 to launch businesses across a range of sectors, including manufacturing, agribusiness, transportation, ICT and renewable energy. More Africans than ever before are returning home after working or studying abroad, encouraged by initiatives like ADM, NEPAD's 'Africa Recruit' or Afford-UK, and enticed by the flourishing business and investment landscape.

Return flows of skilled and educated migrants will go some way to reversing the 'brain drain' that has adversely affected Africa for so long. Diaspora investment, whether via bonds, remittances, or other means such as Diaspora tourism, may stimulate 'brain gain' by promoting tangible links between the Diaspora and its countries of origin that may boost the likelihood of return-migration. More concretely, Diaspora investments may help fund the physical infrastructure and capacity growth that attract further investment and thus create a virtuous circle of growth.

Nonetheless, if African migrants are to truly turn themselves into investors and drivers of the continent's development in the
21st century, a much more collaborative approach is required on both sides.

Research on collective remittances conducted by the Economist Intelligence Unit for Western Union concluded that while many migrant associations would like to invest back home, they lacked the capacity to organise funding or establish investment projects.

Capacity is equally a problem in the receiving communities, with governments often lacking the means to implement projects funded by collective remittances. A public policy landscape that encourages investment and participation in collective remittance projects is critical. In addition, the inclusion of key stakeholders – from migrant workers, their families, all levels of government and academia to the corporate sector and NGOs throughout the process is important to sustain success in the long-term.

Whether through collective remittances or bonds, recruitment campaigns or business funding initiatives, there is clearly a case for collaborative and multi-disciplinary approaches to supporting and implementing Diaspora investment on the continent.

This entails governments playing an important role in capacity building, civil society facilitating information sharing, academia influencing public policy, and the private sector doing what it does best – providing innovative solutions to enable both financial flows and income-generating, employment-creating projects. With the proper inclusion of all stakeholders the scene is surely set for a newfound and sustained African citizenship in the Diaspora that will help propel the continent's economic development in the coming years.