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

This report analyzes the impact of established diaspora on the reduction of poverty in their countries of origin. Arguing that remittances are far from being the only vehicle for diaspora influence, the report examines their contributions to foreign direct investment (FDI), market development, technology transfer, philanthropy, tourism, political contributions, and the more intangible flows of knowledge, new attitudes, and cultural influence. Policy interventions that are likely to strengthen the influence of diaspora in these dimensions are also advanced based on case studies of China, India, the Philippines, Mexico, Eritrea, and Taiwan.

While policy interventions that seek to maximize the income stream from remittances likely impart the most immediate poverty reduction effects, the report finds that such strategies are highly vulnerable to changes in receiving country immigration policies. Other remittance-focused schemes, such as efforts to direct remittances toward government channels or local development programs, often face the challenge of overcoming widespread distrust and skepticism. Business-oriented models seeking to attract human capital and economic investment seem most promising in the long-run. The report notes, however, that the investment climate in some countries may not be suitable for these types of contributions.

Regardless of how countries of origin choose to leverage the contributions of its emigrants, diaspora engagement is a major policy imperative for sending governments. Countries of origin can court their diaspora for opportunities ranging from disaster relief to business development to peace-building by cultivating shared patriotic sentiments, offering emigrants privileged access to business opportunities, and strengthening domestic institutions. Meanwhile, donor governments and multilateral agencies are also encouraged to think systematically about engaging diaspora communities for development. Towards this end, the report recommends lowering the cost of remittance transfers, supporting micro-finance initiatives, providing diaspora groups with training opportunities, and adopting immigration policies that support transnationalism.