Unlocking the economic potential of the Caribbean diaspora
December 11, 2013
- Ninety percent of Caribbean diaspora wants to engage deeper with the region, representing a significant untapped potential for economic development.
- Key barriers to increased engagement include low visibility and awareness of deal flow for local and diaspora angels, and a complex regulatory environment.
- Interventions to overcome these challenges should be designed for the Caribbean as a whole.
The Caribbean diaspora is a sizeable, well-educated, and affluent demographic whose large majority is interested in investing in its countries of origin. Due to the common heritage and strong connections across the region, they overwhelmingly take a regional approach to the Caribbean, rather than a nationalistic one. Supported by the right incentives and policies, diaspora members could play an even larger role in contributing to the region’s development.
These are some of the findings of a new study, “Diaspora Investing: The Business and Investment Interests of the Caribbean abroad”, by infoDev, a global innovation program in the World Bank. The assessment brings together knowledge and data gathered from over 850 self-identified members of the Caribbean diaspora, and sheds light on their characteristics and investment interests.
The Caribbean diaspora is already significantly engaged in the region, with some 70 percent being formal or informally affiliated to organizations in their home countries. Half of those surveyed send remittances and a full 85 percent give back to the Caribbean either through financial help, or other support in kind. Moreover, nine out of ten would like to be even more engaged in the future, potentially as investors. With nearly one diaspora member living in North America or Europe for every resident still in the region, this ability to engage represents a significant untapped potential.
There is also a growing community of angel investors among the diaspora that are already actively involved both where they live and back home. About 23 percent of respondents has already invested in a start-up company of some sort in the Caribbean region. Looking forward, investors have expressed strong interest in financing sectors with high development potential for the region, such as green energy, mobile applications, education, and agribusiness.
But challenges remain. The gap between real engagement and expressed interest remains significant. For instance, while 85% of diaspora members would be interested in investing in a business back home, only 13% of respondents do so today.
“The biggest barrier we found was visibility,” explains Qahir Dhanani, author of the report. “The money is out there, but there is a lack of awareness of investment opportunities, including what deals are there, what deals are high quality, and which entrepreneurs are receptive to angel investing.”
Bureaucracy associated with making such investments, and weak legal enforcement were also highlighted as key barriers. The patchwork of regulations among different countries makes it difficult to unlock the latent demand for regionally-focused investments among the diaspora.
“There should be a serious effort by policymakers and multinationals to create a uniform regulatory environment,” says Dhanani.
Increased engagement and investment by the diaspora will be a boost for entrepreneurs in the region, eventually leading to new, high-skilled jobs
The report provides other recommendations for interventions that are designed for the Caribbean as a whole. Chief among these is the creation of an online marketplace that connects diaspora investors with opportunities back home. Such an approach would capitalize on the geographically dispersed nature of diaspora populations, the increasing use of the Internet for social networking and investing, and the nascent but growing crowdfunding sector.
This low-cost and scalable platform would provide equal access to everybody, regardless of their country of origin. Other recommendations include targeted capacity building for both entrepreneurs and angel investors, and the strengthening of existing angel investing networks.
"This report underscores the important role that the diaspora can play in the Caribbean’s economic development," said Sophie Sirtaine, Country Director for the Caribbean in the World Bank Group. "Increased engagement and investment by the diaspora will be a boost for entrepreneurs in the region, eventually leading to new, high-skilled jobs."
The report, which was funded by the government of Canada, was developed as part of the Entrepreneurship Program for Innovation in the Caribbean (EPIC). The seven-year program aims to contribute to increased competitiveness, growth and job creation in the Caribbean region through the development of a robust and vibrant innovation and entrepreneurship ecosystem, with particular emphasis on supporting high-potential growth-oriented early-stage companies.
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