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The Univer- sity operates through a worldwide network of research and training centres and programmes, and its planning and coordinating centre in Tokyo. Realizing the development potential of diasporas Realizing the development potential of diasporas Edited by Krishnan Sharma, Arun Kashyap, Manuel F. Montes and Paul Ladd © United Nations University, 2011 The views expressed in this publication are those of the authors and do not nec- essarily reflect the views of the United Nations University. United Nations University Press United Nations University, 53-70, Jingumae 5-chome, Shibuya-ku, Tokyo 150-8925, Japan Tel: +81-3-5467-1212 Fax: +81-3-3406-7345 E-mail: [email protected] general enquiries: [email protected] http://www.unu.edu United Nations University Office at the United Nations, New York 2 United Nations Plaza, Room DC2-2062, New York, NY 10017, USA Tel: +1-212-963-6387 Fax: +1-212-371-9454 E-mail: [email protected] United Nations University Press is the publishing division of the United Nations University. Cover design by Andrew Corbett Cover photograph by Jocelyn Carlin/Panos Pictures Printed in the United States of America ISBN 978-92-808-1195-7 Library of Congress Cataloging-in-Publication Data Realizing the development potential of diasporas / edited by Krishnan Sharma . [et al.]. p. cm. Includes bibliographical references and index. ISBN 978-9280811957 (pbk.) 1. Emigration and immigration—Economic aspects. 2. Transnationalism— Economic aspects. 3. Emigrant remittances. 4. Developing countries— Emigration and immigration—Economic aspects. I. Sharma, Krishnan. JV6217.R43 2011 304.8—dc22 2010048824 Contents Figures . viii Tables . x Contributors . xi Foreword . xv Alexander.Trepelkov Acknowledgements . xvii 1 Introduction: Opportunities and challenges for mobilizing the potential of developing country diasporas . 1 Krishnan.Sharma,.Arun.Kashyap,.Manuel.F ..Montes.and.. Paul.Ladd Part I: Setting the stage . 17 2 Understanding diaspora diversity and its impact on development . 19 Jennifer.M ..Brinkerhoff vi contents Part II: Diaspora funds and the poor . 39 3 Remittances, diaspora and inclusive micro-finance: What have we learnt? . 41 Arun.Kashyap.and.Kai.Schmitz 4 Fostering economic opportunity for transnational families . 63 Barbara.Span 5 Citibank’s experience serving the unbanked and under-banked through retail remittance services . 81 Ryan.Newton,.Trang-Thien.Tran.and.Marcela.Ramirez 6 Strengthening national policies for engaging diasporas as a development actor: Lessons from learning-by-doing activities . 96 Manuel.Orozco 7 Developing capacity: Diasporas as transnational agents of development . 125 Chukwu-Emeka.Chikezie Part III: Diaspora entrepreneurs and development . 143 8 Strengthening the business sector in developing countries: The potential of diasporas . 145 Krishnan.Sharma.and.Manuel.F ..Montes 9 Why is diaspora potential so elusive? Towards a new generation of initiatives to leverage countries’ talent abroad . 171 Yevgeny.Kuznetsov 10 Venture capital and fixed-income markets in developing economies . 188 Parag.Saxena 11 A Kenyan diaspora entrepreneur creating social value through tea: A case study . 202 Wanja.Michuki 12 ChileGlobal: A talent network for innovation . 212 Molly.Pollack contents vii 13 Policies to strengthen diaspora investment and entrepreneurship: Cross-national perspectives . 230 Liesl.Riddle.and.Tjai.M ..Nielsen Index . 253 Figures 4.1 Diasporas and development . 68 6.1 Remittances paid by L@Red de la Gente . 105 7.1 The 4Cs of diaspora capital . 129 7.2 Capacity-building model and trade-offs . 133 8.1 Financial and non-financial aspects of diasporas’ business engagement . 157 8.2 Interconnected underlying drivers of diaspora business engagement . 159 9.1 A hierarchy of diaspora impact . 175 9.2 A diagnostic monitoring framework for diaspora initiatives: The trade-off between a decentralized initiative and organizational support . 181 10.1 Venture capital drives US economic growth by creating jobs and revenue . 189 10.2 Companies backed by US venture capital have outperformed their non-venture counterparts . 190 10.3 Companies backed by US venture capital have driven revenue and employment growth even during economic slowdowns . 191 10.4 India’s venture capital investment levels are still well short of those in the United States . 192 10.5 Developing economies tend to have “shallow” fixed-income markets . 196 viii figures ix 10.6 Shallow fixed-income markets tend to have a high cost of money . 197 10.7 Several interrelated levers to consider in strengthening markets for long-term capital . 198 10.8 “Supranational debt” illustration: The European Union . 199 11.1 The Highland Tea Company’s approach to adding value to the small-scale tea-farming sector . 204 12.1 Global competitiveness indicators for Chile . 215 12.2 Educational level of Chileans residing in the United States and Canada . 216 12.3 Phases of ChileGlobal’s development . 218 12.4 The distribution of ChileGlobal’s members . 219 12.5 ChileGlobal: Public–private partnerships . 222 Tables 2.1 Individual characteristics influencing diaspora contributions . 27 2.2 The respective contributions of diaspora types . 31 3.1 Examples of financial institutions combining remittances with other products for the immigrant market . 50 5.1 Some of Citibank’s remittance services . 87 6.1 Three dimensions of diasporas’ links to development . 98 6.2 Cases of diasporas and development activities . 99 6.3 SEDESOL’s 3×1 initiatives . 115 6.4 Elements supporting a skills transfer scheme . 123 7.1 Recommended capacity development possibilities for enhancing diaspora/migrant activity . 136 8.1 Sample of diaspora organizations and networks, 2004 . 154 8.2 Absent human capital: Emigration rates to OECD countries by education level, population 25 or older, 1990 and 2000 . 160 9.1 The institutionalization of diaspora networks as search networks . 178 10.1 Venture capital is not just about information technology . 191 13.1 Key differences between diaspora and non-diaspora investors and entrepreneurs . 232 13.2 Government roles in strengthening diaspora investment and entrepreneurship . 238 x Contributors Jennifer M. Brinkerhoff is Professor of firm; a lecturer in media studies at a Public Administration and London university; an administrator International Affairs at The George establishing an international Washington University, USA. She institute for telecoms regulators at holds a PhD in public administration another London university; a (with a development administration freelance journalist; and an IT emphasis) from the University of systems analyst. Southern California in Los Angeles, USA, and an MA in public Arun Kashyap is Officer-in-Charge of administration from the Monterey the United Nations Development Institute of International Studies, Programme (UNDP) in the USA. She teaches courses on public Maldives. He has led and managed service, international development the UNDP Maldives Office to meet policy and administration, the needs of a young democracy development management, and through activities in democratic organizational behaviour. governance, socioeconomic equity, combating HIV-AIDS, and energy, Chukwu-Emeka Chikezie is the environment, and climate change. Executive Director of the African Earlier, as Senior Advisor for Foundation for Development Private Sector Development in the (AFFORD). AFFORD is a social Private Sector Division of UNDP he enterprise that works to expand and led the programme on Facilitating enhance the contributions that Investments in Pro-Poor Goods and Africans in the diaspora make to Services through public–private Africa’s development. Before partnerships. Formerly, as UNDP’s AFFORD, Chikezie was a senior Climate Change and Clean industry analyst for a consulting Development Mechanism Advisor, xi xii contributors he led UNDP’s engagement in the manufactures and wholesales Clean Development Mechanism and Kenyan specialty teas in the United issues of adaptation to climate States. She has been responsible for change in partnership with diverse product development, sales and stakeholders including the private marketing, and the current sector. distribution of the Highland Tea Company’s products in the United Yevgeny Kuznetsov joined the World States. She obtained her BA in 1996 Bank in 1995 from the Brookings from Bryn Mawr College, USA, Institution. A specialist in where she majored in Economics technological innovation, he focuses and minored in Political Science. on the political economy of reforms in innovation and higher education Manuel F. Montes (“Butch”) is Chief systems in middle-income economies of