Beyond Remittances: The Role of Diaspora in Poverty Reduction in their Countries of Origin

This paper analyzes the impact of established Diaspora on the reduction of poverty, and identifies ways in which policy interventions might strengthen the impact.

The paper examines the role of diaspora in poverty reduction through the following areas of focus:

• Policy and practice towards diaspora in the countries of origin;
• Diaspora engagement in countries of origin (in the economic, social and political spheres);
• Donor engagement with diaspora;
• Recommendations for future activity by donors to maximize the contribution of diaspora to development and poverty reduction.

The study finds that:

• Strategies which seek to maximize the income stream from remittances directly to households are most effective;
• Attempts to pre-empt individual remittances into government channels may erode the poverty-reducing potential of diaspora transfers;
• Poor infrastructure, under-developed markets, corruption and a poor investment climate limit the potential of remittance-focused strategies;
• Different countries pursue different business-oriented models in seeking diaspora contributions;
• The ties that bind the diaspora to their countries of origin are individual or group-based, rather than government-based;
• Donor-focus has been on remittance flows.

The paper recommends that donors should:

• Invest in a stronger knowledge-base for policy-making through research about diaspora involvement in development;
• Provide seed money, technological assistance and logistical support to build diaspora networks that have development potential;
• Encourage and assist diaspora philanthropy;
• Strive for policy coherence;
• Effectively collaborate with diaspora groups and international development agencies.