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February 22, 2015

Responding To: Week 5: Inequality and Inequity

Diasporas and Development: Expanding the Narrative in Sub-Saharan Africa for Shared Prosperity

Wilmot Allen

Dr. Basu’s lecture on trends in global development presented some significant nuggets of intellectual history regarding development economics and highlighted the relative success of Asia in addressing economic growth and inequality. In addition to the significance of savings and investment, the narrative of economic progress in these regions has been strengthened by the economic contributions of diaspora actors. In the world’s poorest region, sub-Saharan Africa, development institutions across the world have deep commitments to diaspora engagement. I propose two areas of greater focus for the development community in sub-Saharan Africa: i) cross-regional analyses of contributions that can be applied to the African context; ii) financial strategies that support new opportunities in diaspora engagement with Africa.

The economic contributions of diaspora actors over the last 65 years in Asia, Latin America, the Middle East and Africa have taken many forms, including remittances, investment capital, consumer loans, knowledge transfer, lowering reputational risks and business networks. The portfolio of case studies is rich, among them industrial parks to attract expatriates in China, India’s tech entrepreneurs, Nigeria’s remittances, Chile’s knowledge exchanges and Israeli diaspora bonds. An analysis of the successful strategies and government policies that supported them would be beneficial for designing new approaches to economic development in sub-Saharan Africa. Linking these lessons to specific African economies and targeted sectors – informal, agricultural, manufacturing/service and technology- could potentially reveal new areas for greater development returns.

The significance of financial mechanisms such as remittances and investment by diaspora actors across the world is well-documented.  A new approach which holds promise for sub-Saharan Africa is identifying and funding talented diaspora entrepreneurs who can scale enterprises both in developed and developing economies. Reputational capital, strong networks in developing economies, local connections in Africa are assets which these entrepreneurs can leverage. This approach may require financing enterprises initially based in the developing the world and later in emerging markets – a shift for some development institutions. The structure of the financing for these businesses could include contingencies for success in achieving expansion milestones.  The success of programs such as the African Diaspora Marketplace can lead to greater support for these initiatives. Another potential strategy is increasing access to finance for businesses controlled by the African diaspora, including African Americans, who have enterprises that can support the development of global supply chains for businesses in Africa. It is important to acknowledge the success of many informal ways in which the African diaspora is already engaged. Coordinated efforts among development institutions, the private sector and diaspora actors could help eliminate some of the fragmentation in these efforts and point to new ways to redress wealth inequality. 

Wilmot Allen is a Ph.D. candidate in the department of Government at Georgetown University, where he researches comparative political economy of Africa, the Middle East and Asia. In addition, Allen works as Principal of 1 World Enterprises, an advisory firm focusing on emerging markets.

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