Diaspora Bank - Proposal

[t!b!]

Let's discuss about the Proposal here. 

The idea for this proposal was first introduced by David Smith. 

Co-edit the proposal HERE. 

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Initial message from David

"How about an opportunity to get the year started with a bang....

Yesterday afternoon I was invited to a meeting with the owners of ...PRIVATE INFO... We discussed at length the issues of Diaspora investment and remittances to Africa and how these are managed organised and often restricted by physical, attitudinal and financial difficulties. 

The focus for the discussion (...) [get document HERE] outlines the Migration and Development Fund.

The closing date for applications is 31.1.11 and proposals will be reviewed approved and funds will be available by April.

I appraised my new colleagues of the Diaspora Bank discussion and pointed them all at Linked in Group, so I anticipate they will join and review what we have been discussing.

My view is that this opportunity allows us to focus all that has been said and to combine the key elements into a proposal to make TDB happen.

What do you think?

I will be looking at this fund from the point of view of Rainbow Interchange and British African - Diaspora Pipeline. I believe this is the door to action for the Diaspora Bank." 

[t!b!]

Fine, so let's get started. 

As I mentioned the document we can co-edit lives here 

  https://docs.google.com/document/d/1TX75y8cW-YjNdrNWPkSZF4nmGc_vEhiLGePVk_k7ppQ/edit?hl=en&authkey=CLCWrY4C&pli=1#    

Who sets the tone first? I've never wrote such proposals, so I cannot start it. 

We don't have enough time, the closing date for applications is next Monday. Together, we can make it happen. 

I remind you that all important documents about the Diaspora Bank have been archived in our shared database. Some of them are accessible from here   

   https://sites.google.com/site/watuafrika/HOME/the-project/diaspora-bank   

On Mon, Jan 24, 2011 at 10:11 AM, David Smith <davids...@gmail.com> wrote:

Thanks for this Tibi, it is most helpful.

I understand the position you are taking and while I recognise the thinking and commitment, I set alongside it a couple of important truths... we have to attract money and ... we have to offer a return to Diaspora Members...

Africa is full of scams and we will have to overcome the cynical investigations of people who have been once bitten...

So let us begin our collaboration with a statement of service

The Diaspora Bank will provide....

for investors...

for investees...

The proposal (attached) requires some very specific information and we will need to partner and in doing so create credibility to be successful. We need to keep it simple and to lean on proven systems through on which we can rely for professional and regulatory compliance.

For example: 

Laws on attracting and promoting investment

Regulations on managing investments

Processes for deploying investment

in particular

Project selection

Project monitoring

Return collection

Processes for delivering dividends to investors
And many stages in the middle...

I believe the power will be held by the regulated entities. As individuals with an idea, we will have to work very hard to ensure that we maintain ownership and control.

If we have a view on the above, we can then calculate the value of what we want in funding and the methods of delivering this service.

I look forward to hearing back from you... and I will explore the links you sent me.

Kind regards

David

[t!b!]

World Bank African Diaspora Bank group http://www.linkedin.com/groups?mostPopular=&gid=3706452   

Do you think this could help us? 

[t!b!]

REMITTANCE

Article : Leveraging the Impact of Remittances to Africa

An often overlooked fact about the African Diaspora is that the amounts of money migrants send home to relatives and friends each year generally exceeds the amount of money given to Africa through official development aid. Estimates of the average total annual value of remittances to Africa vary between $32 and $40 billion. (This excludes the informal network of money transfers, which is significant. If taken into account this figure could increase by as much as 50%.) Official development aid is around $25 billion per annum (according to promises issued during the G8 Summit).

According to the report, two major money transfer companies control 65% of all remittance payout locations [in Africa]. Western Union and MoneyGram are by far the most significant players in the region.

Other thoughts on remittance

This is one of my comments on World Bank African Diaspora Bank group http://www.linkedin.com/groups?mostPopular=&gid=3706452   

Private transfers have two very important characteristics. 1) They rich their target 2) at the right moment! This transfer goes between two parties (or more) that know each-other very well, and it addresses real problems at the right moment.

Usually, this peer-to-peer exchange doesn't necessarily follow a plan for sustainable development. It constitutes a relief of an acute problem, a "bandage on a bleeding wound". I suppose (without having any data) only a small percentage of the total volume is directly aimed at developing a small enterprise, for example. BUT, we shall not underestimate the indirect role of the well targeted relief in local development. By taking away some worries for the basics for subsistence, the local people move from living in the present to thinking about their future.
Improving these peer-to-peer exchanges will definitely help Africa.  [tiberius]

In response to it Paolo Leotti added: 

I agree with Tiberius, large part of remittances are not used for business. I'm not sure if there is a direct relation between good living conditions and investments because sometimes remittances are considered as *easy money* and are they do not stimulate local development. 

I know quite well the case of senegalease diaspora living in Spain. In their opinion the most relevant problem for investing in their home country is the access to credit, Nevertheless I think we have to adopt a more comprehensive approach also based on evaluating and empowering diaspora's human and social capital. In other words it is not a simple matter of money!

Can we integrate some of this into the proposal? 

[t!b!]

"Each investor can specify which country they would like to invest in, at the time of making the investment and each fund will potentially break down into 54 different programs."

I would go even further... Why not let investors to chose the enterprise they want to invest in? The Diaspora Bank would take the role of facilitator, providing additional information and analysis, and will take care of the logistics. 

The idea is to tap into that HUGE flow of remittance (see my previous post for the annual figures), and to channel a portion of it into a coherent development plan for economical development. And here's one interesting thing. The cash flow from the diaspora back to Africa looks chaotic, but it is actually structured along social connections. The Diaspora Bank needs to find a way to harness this very important aspect. By channellings the cash flow through the Diaspora Bank we need to also preserve and to integrate the underlying social structure, social connections and all the information that comes with it. Senders/investors are bound to receivers through connections of trust, friendship, empathy, etc. Moreover, senders/investors also possess a wealth of crucial information about the receiver (a family member, someone from the same village, town, area, etc) as well as on the context/environment. The Diaspora Bank needs to mediate the interaction between the sender and the receiver, to enable them to make informed decisions that lead to local development and to the creation and growth of profitable and sustainable enterprises. 

The difference between a normal bank and the Diaspora Bank is that the Diaspora Bank would have access to very detailed information about recipients by preserving and exploiting already existing relations between investors and recipients.       

 
The underlying social structure underneath the remittance flow is a precious resource.

[David Smith]

Hi Tibi

I think we are at cross purposes here, one function is remittances, which is entirely family related and that is one aspect of the activity we are talking about. The Rainbow platform I am bringing to market provides a direct person to person transfer, instantly, supported by licensed entities at both ends. So I take that as a given,,,

The second and key function is an investment function. TDB will foster the process, introducing investors to opportunities and businesses to investors. If there is a family link, then the transfer of money is one small aspect. The process of fostering a family investment and making it easy to create a deal is unlikely to be a need we can meet. The relationship is established, the information is already known, the transaction will be negotiated between the parties, we can only provide a money transfer function and maybe some template paperwork...

I like the KIVA idea of introducing parties, but for investment rather than micro-finance.

My understanding was that we wanted to lead with a completely new investment function...

My suggestion is that we do one thing well and grow, rather than trying to do multiple things.

rgds

David

[t!b!]

Thanks for your input David. I am sensitive to the distinction you make. Let me make it more clear why I brought remittances into the Diaspora Bank discussion. First I want to say that my specialization is not in finance, far from it. So please bear with me. 

We are talking about a DIASPORA Bank. The specificity of this financing organization is to rely on the emotional attachment of Africans living abroad to their homeland, to their families and friends back in Africa, in order to obtain from them some of their hard-earned money, for investment in Africa. Let's face it, investing in Africa is risky business. We hope that some Africans, especially these how can afford it, those who live and work abroad, will accept our offer for their love of their country, for their attachment, for their knowledge/understanding of the local business environment, etc. At the same time, the same individuals we are "targeting" are already financially engaged towards Africa, by helping their families - REMITTANCEs. The idea here is that if the Diaspora Bank builds a relationship with the diaspora, by the same token it can also integrate this vast system of cash flow, remittances. If we are successful in building a good relationship with the diaspora we will be able to redirect a portion of this massive flow from survival to local business development. This is where the Diaspora Bank meets its social mission. We don't want to be just another bank. There is no real opening in that field. The opening is into the social enterprise space - a pro-profit enterprise with a social mission. The goal is to turn some of the financial help into development (of small local enterprises). Not to be just a vehicle. 

Obviously, the Diaspora Bank will also propose other investment opportunities to the Diaspora, which is the second function you are referring to. But if we only take into consideration this second function I don't see how we can differentiate from other banks. Moreover, in this case I don't see why you would limit yourself to the diaspora, any money would smell just the same...      

In short, mixing investment with remittances doesn't look to me to be a bad thing. It helps you get deeply rooted into the African society, to integrate the vast system of social relations underlying this huge cash flow (you accumulate all this information being the vehicle of these transactions), enables you to intervene to change some of the flow into development, which will further benefit your investment initiatives. Moreover, all this information and our proximity will enable the Diaspora Bank to smell good investment opportunities and will make it easier to propose them to investors. 

Is there a possibility to merge (or interface) your Rainbow platform with the Diaspora Bank? I really smell synergy between these two... 

Do you think we can integrate some of these ideas into our proposal? 

Lourens, Vuyo, Ian, what do you think? Can we nail this within a week?  

[t!b!]

We are making progress. Thanks David, I'll take a look at the proposal today!