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The study of diasporas across the world has recently emerged to understand their key role in the economic development of their home countries. This research field has been mainly focused on the impact of migrants’ remittances in the balance of payments of these countries. At the same time, different financial instruments have been developed to attract further funds from diasporas, such as: savings accounts, remittances securitizations, transnational loans, diaspora bonds and mutual funds.

Within this trend, the public and private sectors from their home countries have been targeting diasporas as funding source. In general terms, experiences with the issuance of diaspora bonds revealed a lower country risk premium in comparison to equivalent instruments placed with the wider investment community. This evidence has been related to a relatively deeper knowledge that diasporas have about their home country contexts, hence, making them more willing to undertake typical risks from these countries such as foreign exchange restrictions, debt issuers’ credit risk, among others. Due to their relatively higher connection with these countries, diaspora investors might accept alternative payment methods including local currencies as well as other domestic assets.

Moreover, the existence of large migrant communities abroad with strong emotional bonds to their home countries represents a strategic element in the internationalization of businesses from their respective countries.  These businesses could rely on a potential consumer base abroad demanding exports of goods and services due to a high emotional affinity, at the same time, this base might ease the running of operations of these businesses in countries with high presence of compatriots to locally cover their needs.

On the other hand, the success that can be achieved in fundraising processes with diasporas to foster the economic development in their home countries is dependent on the current general business conditions in these countries. From this point of view, it can be highlighted successful experiences with the placement of diaspora bonds by governments from India and Israel in contrast with failed experiences with the Ethiopian government in 2008 within a local context of political instability, without offering enough collaterals and procuring repayments in local currency.

Based on the previous experiences, the right timing to allocate resources from diasporas into their home countries should take into account the evolution of the business context in these countries for a higher developmental impact. In order to gain time in this evolution and to strengthen the expected future business ecosystem in their home countries, different proposals have emerged to encourage business ventures run by tjeir compatriots abroad with the expectation that these ventures might spread different benefits in their home counties once their business context improve. These proposals take advantage of human resources within diasporas to mitigate the unfavorable impact of brain drains by avoiding their underemployment in their new countries of residence, fostering their future capabilities to back the economic development of their home countries.

One of the initiatives proposed by USAID to support this migrant population is the promotion of Diaspora Private Equity Funds. The original approach of these funds was oriented towards channeling funds from diasporas to invest in companies in their home countries in pursuit of their growth, expansion and corporate innovation (Terrazas, 2010). These funds would be mainly focused on medium-sized companies, considering that large companies can have access to more sources of funding whereas micro-companies have greater financing facilities through microfinance institutions. The private equity business model contributes with smart money to this segment of medium-sized companies through a combination of financial assets and deep knowledge on business management practices, especially when these businesses seek to enter into new markets abroad to mitigate unfavorable conditions in their home countries.

A relevant experience in terms of promoting the funding by diasporas to initiatives of their compatriots abroad is represented by the Syrian diaspora with its proposal «Mobilizing New Markets and Investment for Syrian Refugees» managed by the Syrian International Business Association (SIBA), which develops a network in the Syrian diaspora to provide investments, technology transfer, market identification and skills training to favor the expansion of Syrian companies outside Syria during the civil war period as well as within the country once this conflict can be overcome, contributing to the reconstruction of its productive system (CMI, 2017).

At the same time, different online crowdfunding initiatives have emerged to channel funds from diasporas into different ventures, mainly in their home countries. These specialized platforms are at their initial development stages, such as Homestrings and Ovamba, which are focused on investors from diasporas who previously did not have access to these investment opportunities, generally reserved for institutional investors. Likewise, the Calvert Foundation also makes use of these channels to offer diaspora bonds, with pilot tests in India and Latin America. Other participants in this private equity modality include Developing Markets Associates, African Diaspora Marketplace, and International Diaspora Engagement Alliance (Bertha Center, 2015). In the Latin American context, there are important investment opportunities for their communities abroad in order to promote the local development and to strengthen the economy of the diaspora abroad. Among these cases, diasporas such as the ones from Ecuador, Guatemala, Honduras, Mexico and El Salvador stand out, with plenty of business opportunities in their home countries, which currently present favorable business conditions, while other diasporas such as the ones from Cuba and Venezuela could contribute to strengthen ventures of their compatriots abroad with the expectation that they might revert to their countries of origin to the extent that the prospects for private businesses in these countries improve.


These initiatives contribute to identify a new asset class within the private capital area whose main advantage for diaspora investors is centered on their better knowledge of the local context as well as their cultural affinity with the companies in which they invest, inside and outside their home countries, mitigating many of typical problems of asymmetric information in the context of investment processes in private equity. At the same time, fundraising from diasporas are expected to contribute to the present and future development of their home countries.



Bertha Centre (2015). “Investment Vehicle Innovations”. Accessed from:  as at 09/20/2020.

CMI – Center for Mediterranean Integration (2017). “Diaspora Mobilization”. Accessed from:  as at 09/20/2020.

Terrazas, Aaron (2010). “Diaspora Investment in Developing and Emerging Country Capita Markets: Patterns and Prospects”. Accessed from:    as at 09/20/2020.