This digital artifact highlights the importance of mobilizing the diaspora savings through "diaspora bonds" to finance development projects in a developing country like Cameroon with a growing and dynamic diaspora around the world.

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Development Finance Impact Project – Digital Artifact
Mobilizing diaspora financial resource and expertise towards development projects: a
case study of Cameroon
By: Emmanuel Lao
Content
I. General overview on remittances flows ..................................................................................... 2
II. Stakes and challenges of Remittances in Cameroon ............................................................... 3
III. Measures needed to unlock Diaspora savings investment potentials in Cameroon:
Emissions of diaspora bonds as a innovative mechanism to attract diaspora savings ............... 5
IV. References:.................................................................................................................................... 6
Abstract:
Remittances- defined as the financial resources or money sent back by Diasporas to their
families -are considered as one of the key innovative financing for development in many
developing countries in the future. Apart from remittances, the Diasporas also bring back to
their countries of origin, know-how and expertise they got in their host countries. Cameroon,
like many developing countries can rely on these resources in the future with regard to its
growing and dynamic diaspora. According to the World Bank World Development Indicators,
1/3 of the Cameroon population may be living abroad today (WDI, 2017).
Although remittances sent back home by this diaspora (through formal channels) are not
significantly important knowing their very low share to GDP which is less than one percent
(0.8% of GDP), compared to some countries like Mali, Burkina Faso or Egypt where it is around
10% or higher (in the case of Liberia and The Gambia with respectively 24.4 % and 22.4%
according to IMF and the World Bank, 2015), their volume has been increasing in a very
spectacular way these recent years. They could overpass Official development Assistance (ODA)
and Foreign Direct Investments (FDI) in a nearest future if the current trend is maintained.
Remittances and diaspora savings are an opportunity for development finance. Therefore,
Government officials and financial institutions should design financial instruments to tap
diaspora savings and leverage remittances for development finance.
But the main problem raised by these financial inflows, is their relatively low impact on
development. They seem to encourage more consumptions and laziness rather than fostering
productive investment. Recipient families use to spend money received massively in
organizing folkloric ceremonies. In this digital artifact, we are trying to show how resources got
from the diaspora (be them financial or technical) could be channeled and geared towards
investment project that can foster economic development.
Key Words: Remittances, Diaspora Bonds, Innovative finance, Development finance.

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I. General overview on remittances flows
Remittances are defined as the financial resources or money sent back by Diasporas to
their families. According to the World Bank, after a drastic decrease from 3.2 percent
in 2014 to 0.4 percent in 2015, a slowdown largely due to weak oil prices, remittances
to developing countries are expected to rise by around 4 percent a year in 2016–17.
(World Bank 2016). Moreover, remittances are becoming more important and
predictable than Official development assistance (ODA) and more stable than Private
investments flows (figure 1). For example, in Africa, remittances were estimated at $63.8
billion in 2014, surpassing both official development assistance and foreign direct
investment flows to the continent (UNCTAD, 2016).
Figure 1: Trends in Capital flows to Development countries (USD billion), 1990-2014
Not only remittances have proven markedly stable and counter-cyclical, but also they
represent an essential non-debt creating, safety-net vehicle administered by extended
families and local communities rather than provincial and national governments (Stuart
S. Brown, 2006).
The scope and stability of these flows has led Governments and financial institutions
to design financial instruments to tap diaspora savings and leverage remittances for
development finance (UNCTAD, 2016)
From that perspective, they are considered as innovative financings for the
implementation of the Addis Ababa Action Agenda (AAAA) and the realization of the
Sustainable Development Goals (SDGs) or the Agenda 2030 for transformational
development aimed to eradicate extreme poverty and hunger in the world.
Nevertheless, despite their stable characteristic, remittances are subjected to some
uncertainty. As a matter of fact, economic crises in host countries as well high cost of
sending money, black market premia and imposition of capital controls in home
countries could limit formal remittance inflows in some countries. According to the

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World Bank, the global average cost of sending $200 was about 7.4 percent in the
fourth quarter of 2015, down slightly from the previous quarter and 0.6 percentage
points below the end of 2014. Sub-Saharan Africa, with an average cost of 9.5 percent,
remains the highest-cost region.
II. Stakes and challenges of Remittances in
Cameroon
Remittances are considered as one of the key innovative financings for development
in many developing countries in the future. Apart from remittances, the Diasporas also
bring back know-how and expertise they got in their host countries to their countries
of origin.
With regard to its growing and dynamic diaspora, Cameroon, like many developing
countries can rely on these resources in the future. According to the World Bank World
Development Indicators 2017, 1/3 of the Cameroon population may be living abroad
today. In 2010, the Emigration rate of tertiary-educated population represented 17.2%
of the whole population of emigrants where 8 % were physicians trained in the country
(Bhargava, Docquier, and Moullan, 2010). The main destination of these people are
France, Chad, Gabon, the United States, Nigeria, Germany, Italy, the Central African
Republic, Spain, the United Kingdom (World Bank, 2011).
The volume of financial resources sent back by a growing diaspora has been increasing
in a very spectacular way these recent years. They could outpace Official development
Assistance (ODA) and Foreign Direct Investments (FDI) in a nearest future if the current
trend is maintained.
Figure: Remittance inflows to GDP for Cameroon
Source: World Bank and Fred https://fred.stlouisfed.org/series/DDOI11CMA156NWDB

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As shown by figures in the following table, much remittances sent back over the period
2003-2009 were done by workers.
Table : Inward remittance flows (US$ millions), 2003-2009
Source : Dilip Ratha, Sanket Mohapatra and Ani Silwal, Migartion and Remittances, Factbook
2011, World Bank.
Yet, remittances sent back home by this diaspora (through formal channels) are not
significantly important knowing their very low share to GDP which is less than one
percent (0.8% of GDP) compared to some countries like Mali, Burkina Faso of Egypt
where it is around 10% or Liberia where it is represented 24.4% of GDP in 2014.
Figure 2 : Top 10 remittances recipients in Africa in 2014 (percentage of GDP)
Remittances are considered today as an important flow of foreign currency which
reaches directly hundreds of thousands of families. But the main problem raised by
these financial inflows, is their relatively low impact on development. They seem to
encourage more consumptions and laziness rather than fostering productive
investment. Though a few share of remittances is devoted to projects in agriculture,
education, health and housings, an important share of remittances is used for
unproductive consumption. Recipient families use to spend money received massively
in organizing folkloric ceremonies.
Moreover, the cost of sending money remains and there is a need to lower remittance
costs and make services more efficient and viable. The experience of collaborative

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arrangements among telecom operators and money-transfer operators in countries
like Kenya, Rwanda, Tanzania and Uganda which have improved the ease of making
mobile money transactions across borders should inspire government and financial
institutions in Cameroon.
III. Measures needed to unlock Diaspora savings
investment potentials in Cameroon: Emissions of
diaspora bonds as a innovative mechanism to attract diaspora savings
According to UNCTAD (United Nations Conference on Trade and Development) Report
2016 on Economic development in Africa, the Complementary Modalities for Financing
Development in Africa were estimated to $497 billion in 2013 by using data on
international migrants. And a large share of diaspora savings is held in bank deposits.
In order to gain interest on these deposit which currently receive near-zero interest
rates in host-country banks, it seem more attractive for migrants workers to invest
their savings in other outlets or vehicles, such as diaspora bonds. Defined as “debt
instruments issued by a sovereign country to raise funds by placing them among its
diaspora population” (UNCTAD, 2012b), Diaspora bonds may also benefit from
emotional connections or patriotic motives to attract investment, which can make them
less procyclical than other external capital flows (UNCTAD, 2016).
According to the World Bank (2015c), diaspora bonds could be used to mobilize about
one tenth of the annual diaspora savings – over $50 billion – to finance development
projects. The Government of Cameroon, like many other developing countries having
a skilled and dynamic diaspora estimated to more than 4 million around the world by
the Cameroon Department of Foreign Affairs, may count on the emission of diaspora
bonds to finance development projects.
By learning from the experiences of some African countries like Ethiopia, Ghana, Kenya
and Zimbabwe, the Government of Cameroon can also explore the option of issuing
diaspora bonds to bridge financing gaps. Owing to a $50 million Golden Jubilee savings
bond issue in 2007 and targeted at Ghanaians at home and abroad, the Government
of Ghana has invested raised funds in infrastructure projects in Ghana. Similarly, In
2011, Ethiopia launched its second diaspora bond at a very competitive interest cost
with a coupon level that is lower than the benchmark, typically the 10-year United
States treasury bond, called the “Renaissance Dam Bond”, which were used to fund the
construction of the Grand Renaissance Dam at an estimated cost of $4.8 billion (African
Development Bank, 2012).
Remittances and diaspora savings are an opportunity for development finance. At the
level of the nation, remittances if well channeled towards productive investments, can
boost economic development, help in efforts to reduce poverty, and promote access
to productive resources especially among marginal social categories (Adams, 2005).

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Governments and financial institutions should design financial instruments to tap
diaspora savings and leverage remittances for development finance. The interest rate
applied to diaspora bonds should be attractive to foreign investors to
compensate for the political risk and the use of formal remittance channels
should be encouraged so that remittances can serve as collateral and lead to
financial deepening in Cameroon.
IV. References:
 World bank (2016), Migration and Remittances Recent Developments and Outlook
(2006), World Bank Migration and Development Brief 26, Washington DC, April 2016 ;
 International Monetary Fund (2009),‘Do Workers’ Remittances Promote Economic
Growth?’, International Monetary Fund Working Paper, WP/09/153, Washington, DC
 Dilip Ratha, Sanket Mohapatra and Ani Silwal, Migartion and Remittances Factbook
2011, World Bank, Migration and Remittances Unit,
www.worldbank.org/prospects/migrationandremittances;
 World Bank (2009), Innovative Finance For Development Solutions Initiatives of the
World Bank Group, http://siteresources.worldbank.org/CFPEXT/Resources/IF-for-
Development-Solutions.pdf
 Stuart S. Brown (2006), Can Remittances Spur Development? A Critical Survey,
http://onlinelibrary.wiley.com/doi/10.1111/j.1468-2486.2006.00553.x/full
 Candace Martinez, Michael E. Cummings, Paul M. Vaaler, Economic informality and the
venture funding impact of migrant remittances to developing countries
 Margaret E. Peters, Emerging Trends in the Social and Behavioral Sciences, 2015
 Santha Vaithilingam, Mahendhiran Nair, Thangarajah Thiyagarajan, Managing Money
Laundering in a Digital Economy, Journal of Asia-Pacific Business, 2015
 Paul M. Vaaler, Diaspora Concentration and the Venture Investment Impact of
Remittances, Journal of International Management, 2013
 Cynthia Buckley, Erin Trouth Hofmann, Are Remittances an Effective Mechanism for
Development? Evidence from Tajikistan, 1999–2007, Journal of Development Studies,
2012
 David Hudson, Developing geographies of financialisation: banking the poor and
remittance securitisation, Contemporary Politics, 2008;
 UNCTAD (2016), “Complementary Modalities for Financing Development in Africa:
Remittances and Diaspora Bonds”, The Economic Development in Africa Report 2016 :
Debt Dynamics and Development Finance in Africa, chap 4, page 113
 Adams, R. (2005), Remittances and poverty in Ghana, Development Research Group.
Washington DC: World Bank.
 African Development Bank Group (2013), Harnessing remittances for Africa’s
development, Retrieved April 20, from http://www.afdb.org/en/blogs/afdb-
championing-inclusive-growth-across-africa/post/harnessing-remittances-for-africas-
development-11565
 OECD (2006). International remittances and their role in development. SOPEM Edition,
Organization for Economic Co-operation and Development.
 McAdams, Susan, Innovative Financing and Financial Solutions, World Bank Group
Online leaning GBGX, Financing for development : unlocking investments
opportunities, 2017