MICROCAPITAL BRIEF: African Development Bank (AfDB), World Bank Group Publish “Leveraging Migration for Africa: Remittances, Skills, and Investments” Report

African Development Bank (AfDB), a development finance institution that gives loans and grants to governments and private companies in Africa, and the World Bank Group, a Washington, DC-based group of five institutions with a shared mission to improve living standards for people in the developing world, have jointly published a report titled “Leveraging Migration for Africa: Remittances, Skills, and Investments.” The report presents evidence that suggests migration and remittances help to reduce poverty in migrant’s home communities in Africa.

Remittances sent to Africa – estimated at USD 40 billion – reportedly represented Africa’s largest source of foreign capital in 2010 after foreign direct investments; however this figure is deemed to be significantly underestimated. Two-thirds of migrants from Sub-Saharan Africa reportedly go to other countries in the region, while more than 90 percent of migrants from North Africa have relocated outside the African continent. Mr Hans Timmer, director of development prospects at the World Bank, commented, “Adapting policy responses to demographic forces and crafting multilateral arrangements for managing future migration is essential.”

Mr Dilip Ratha, an author of the report and lead economist at the World Bank, argues, “African governments need to strengthen ties between diaspora communities and home countries, protect migrants, and expand competition in remittance markets [as] the potential of migration for Africa remains largely untapped.” Accordingly, one innovation that the report identifies as having significant potential in diaspora bonds, which are sold by governments or private companies to nationals living abroad. Mr Ratha proposes that Sub-Saharan African countries can potentially raise between USD 5 billion and USD 10 billion per year in diaspora bonds.

The report also recommends that institutions such as post offices, savings and credit cooperatives (SACCOs), rural banks and microfinance institutions (MFIs) can play a critical role in expanding access to remittances and other financial services to poor people, including via mobile technology.

By Jacqueline Foelster, Research Associate

About African Development Bank (AfDB): Established in 1964, AfDB is a development bank that provides loans and grants to governments and private companies in Africa. AfDB commits approximately USD 3 billion annually to African countries. Owned and funded by member governments, the bank has a mandate to reduce poverty and promote sustainable development. Currently, AfDB shareholders consist of 77 member countries, which include 53 African countries. The president is Donald Kaberuka as of April 2011.

About The World Bank Group: The World Bank Group consists of five institutions, all owned by member countries that carry ultimate decision-making power. The Group’s mission is to improve living standards for people in the developing world. The World Bank Group encompasses the World Bank, which consists of the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA); the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID).

Sources and Resources:

[1] African Development Bank Group, “African migration generates win-win benefits, says new report”, http://www.afdb.org/en/news-and-events/article/african-migration-generates-win-win-benefits-says-new-report-7878/

MicroCapital.org Brief, January 5, 2011, “African Development Bank (AfDB) Launches Migration and Development Fund (MDF), Taking Proposals Relating to Remittances, Local Investment”, https://www.microcapital.org/microcapital-brief-african-development-bank-afdb-launches-migration-and-development-fund-mdf-taking-proposals-for-projects-relating-to-remittances-local-investment/

Microfinance Paper Wrap-Up, May 4, 2010, “Outlook for Remittance Flows 2010-2011, by Dilip Ratha, Sanket Mohapatra and Ani Silwal”, https://www.microcapital.org/microfinance-paper-wrap-up-outlook-for-remittance-flows-2010-2011-by-dilip-ratha-sanket-mohapatra-and-ani-silwal/

MicroCapital Universe Profile: African Development Bank (AfDB), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=African+Development+Bank++%28AfDB%29

MicroCapital Universe Profile: The World Bank Group, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=The+World+Bank+Group

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