Eric Guichard, CEO, Homestrings
Josephine G. Cervero, First Vice President, Trust Banking group, Land Bank of the Philippines
Mayumi Ozaki, Public Management, Financial Sector and Trade Division, South Asia Department, Asian Development Bank (ADB)
Bibiana Vásquez, Monitoring and Evaluation and Remittances Specialist, IFAD
Mauro Martini, Remittances and Development Officer, IFAD
Although there is great potential for diaspora investment, it is currently inefficiently leveraged. It can be improved by focusing on better preparing the target client audience and by expanding the range and quality of products offered.
The primary impediment to migrant investment is knowledge. Migrants often do not possess the financial literacy needed to make appropriate investment choices. This lack of understanding promotes a general mistrust in financial vehicles, making it difficult to link migrants to investment instruments. Despite this, migrants are willing to invest in meaningful opportunities, if given adequate guarantees. For example, they want to know that the money is funding important programs, such as public infrastructure and education, even if it is in countries other than their home.
A secondary impediment is the products themselves, towards which institutions often adopt a monolithic approach and provide few investment options. Linking individuals to products requires a more nuanced strategy, with instruments that reflect the client profile. For example, women tend to be more conservative when investing, but also more disciplined about saving. Migrant workers generally tend to be low skilled and financially illiterate, while only a limited of affluent diaspora members have the ability to understand financial products issued by mutual funds. It was highlighted that Nepalese diaspora bonds were unsuccessful partly because they required too much sophistication on the part of the user. Businesses must consider these differences and focus on the client needs rather than just institutional strategies.
Governments can help address these issues with providing better financial education for migrant and their families. In particular, they can promote savings and investment—especially toward retirement. Among other success stories featured was the Bangladesh’s Migrant Family Motivation Initiative (MFMI), which works with migrant families one-on-one. The public and private sector can work together to promote a better regulatory environment across national boundaries for diaspora investment.
Both public and private sector can take advantage of remittances as a source of investment.
- Financial literacy is key: the public sector should promote education generally, and private sector should develop products that require minimal understanding
- Understanding the migrant experience is crucial: public sector can educate migrants before they emigrate, and private sector can recognize that migrants are a heterogeneous group with varying skill levels and needs.