Latest news with #developmentfinance
Forbes
31-07-2025
- Business
- Forbes
How Diaspora Capital Can Drive Growth In Africa And The Caribbean
In 2023, diaspora communities in Sub-Saharan Africa and the Caribbean remitted an estimated $54 billion and $18.2 billion, respectively. However, more and more investors from Kingston, Lagos, and other places want to do more than just transfer funds back home. These investors, aware of the difficulties in their home countries, aim to mobilize capital for affordable housing, expand financial access, and generally, contribute to the creation of scalable, domestically developed solutions to boost these countries' economies. A 2024 study reviewing existing research on diaspora direct investments, identifies diaspora capital as becoming an increasingly relevant source of development finance: 'Amid global economic slowdown and in a post-Covid-19 world, focusing on diaspora direct investment can be a new source of investment, particularly for countries that have substantial numbers of migrants and diaspora around the world.' In an interview, David Mullings, founder and CEO of Blue Mahoe Capital, shared how this insight reflects lived reality. He has spent years working with diaspora communities looking to invest in their home countries. 'We all want to invest back home, but we don't have easy ways to do it,' explains David Mullings, 'Nobody has really spoken to the diaspora to say, 'Hey, here's a way to deploy capital back home in a way that is sustainable, that builds these countries, so that others don't need to leave.'' Why the Diaspora Matters Historically, discussions about investing in Africa and the Caribbean center on international aid and foreign investments. The diaspora's economic potential remains largely untapped, yet if utilized, it can have a significant impact. Take financial access for example. Being able to transact easily is the hallmark of any thriving economy. As Mullings states, 'if payments don't work, nothing works. Fintech underpins the entire innovation ecosystem.' Mullings has worked with diaspora investors to support funding for Seed Jamaica, a fintech platform offering micro-lending for personal loans, launched last year. So far, the fintech company is already changing lives, and 'people are able to apply and get money in 48 hours without having to physically go into a branch and sign over their life,' he shares. Blue Mahoe Capital also supports affordable housing in Jamaica by building one-bedroom homes funded by diaspora capital. 'It's the first time the diaspora has pooled money to go and build houses for locals to buy,' says Mullings. 'These houses do not go towards Airbnb, but are homes for teachers, nurses, and public sector workers.' In Africa, Borderless is connecting diaspora communities with investment opportunities in real estate and startups, and has since its launch in 2024, processed about $500,000 in transactions. Why Diaspora Capital is Different Founders in Africa and the Caribbean often overlook diaspora investments, instead focusing on Silicon Valley funding. Mullings, however, points out that founders who do so are missing out because, unlike venture capital, diaspora finance offers a seat at the table. 'Typically, solutions that have been brought to African, Caribbean and Pacific countries have been designed by our former colonial masters. That automatically has issues,' he says. 'So, we need stuff essentially for us, by us, designed with us, our culture in mind.' To illustrate the points, he recalls the example of General Electric, where the company's U.S.-designed, expensive medical equipment was unaffordable in China until local engineers redesigned it to fit the market. This case study highlights the value of using local knowledge to design for local markets. Mullings, therefore, encourages entrepreneurs to explore diaspora capital as a way to scale home-grown solutions that cater to the needs of local communities. The Roadblocks Harnessing diaspora financing, however, is not without its challenges. Many left their homes in search of better opportunities due to systemic dysfunction and still carry a sense of distrust. Mullings explains that there is a 'trust deficit' fueled in part by negative stories circulating on social media. Yet, emotional ties endure. As the 2024 study puts it, 'Members of the diaspora may not be directly involved in economic and social challenges of the origin country, but they are often concerned about it and may contribute to pursuing solutions.' Convincing them that their capital investments in local enterprises are safe and secure, requires some education. 'So, we've had to bring people up to speed on the positive stories from these various countries in the region,' says Mullings. And the trust challenge goes both ways. Local people—whether founders, potential board members, or service providers often see diaspora investors as 'foreign-minded.' 'So, we are seen as troublemakers sometimes,' Mullings admits. 'But it's good trouble. We need that good trouble if we're going to be globally competitive.' To navigate this, diaspora investors often have to collaborate with local champions so as not to be seen as out of touch. The second challenge is financial literacy. It can be difficult for retail investors to understand how investments work, particularly the risks associated with capital loss and the reality that returns aren't guaranteed. In the Caribbean, a particular challenge has been the difficulty in doing business, particularly when opening bank accounts and setting up entities to pay local workers, instead of wiring money from the U.S. to Jamaica. Mullings says, 'Payments underpin everything. If I can't easily open a bank account to transact business, pay staff, pay for services, or collect revenue, I'm going to have a problem, regardless of what industry I'm in. And the single biggest problem we have in these countries is banking.' The Diaspora Financing Playbook Often, Caribbean and African communities look for inspiration and funding from the Global North, but there can be value in South-South cooperation, with the Caribbean learning from Africa's successes and failures and vice versa. 'We tend to focus too much on North America and what's happening there. Oh, I want to launch the Uber of Jamaica versus how about the M-Pesa of the Caribbean? Why not actually partner with them and bring it over? We essentially have been taught by the media to look down on Africa,' Mullings observes. A cultural shift is also needed in Africa and the Caribbean to normalize failure, which is often perceived as taboo. In contrast, in Silicon Valley, it's a rite of passage, as investors are more interested in backing entrepreneurs who have failed and learned from that experience than those who haven't failed at all. If we are to innovate, 'we have to change failure from being a badge of shame to a badge of honor,' he says. For local enterprises seeking to attract diaspora capital, Mullings recommends understanding your 'why,' perfecting your pitch, and engaging with diaspora investors on their preferred platforms, Facebook, LinkedIn, Instagram, and TikTok, to identify potential investors in your region. He says: 'You need to be able to communicate the problem you're solving, what your solution is, and why you care so much about that problem.' He also suggests tailoring the offer by understanding what diaspora investors are looking for and what it would take to write a cheque to support local businesses back home, recognizing any past challenges they may have encountered and explaining why their offer is different. 'They focus so much on Silicon Valley and how to pitch a VC, or how to get into Y Combinator. But that's not who you're talking to. So, tailor the pitch,' Mullings adds. In all, diaspora communities have much to offer beyond remittances. Diaspora capital is a symbol of resilience and resolve. It's a means for those abroad to invest in shaping the country of their dreams.
Free Malaysia Today
22-07-2025
- Business
- Free Malaysia Today
Western aid cuts cede ground to China in Southeast Asia
Due to western aid cuts, official development finance to Southeast Asia is projected to fall by more than US$2 billion by 2026. (Bernama pic) SYDNEY : China is set to expand its influence over Southeast Asia's development as the Trump administration and other Western donors slash aid, a study by an Australian think tank said Sunday. The region is in an 'uncertain moment', facing cuts in official development finance from the West as well as 'especially punitive' US trade tariffs, the Sydney-based Lowy Institute said. 'Declining Western aid risks ceding a greater role to China, though other Asian donors will also gain in importance,' it said. Total official development finance to Southeast Asia – including grants, low-rate loans and other loans – grew 'modestly' to US$29 billion in 2023, the annual report said. But US President Donald Trump has since halted about US$60 billion in development assistance – most of the US overseas aid programme. Seven European countries – including France and Germany – and the EU have announced US$17.2 billion in aid cuts to be implemented between 2025 and 2029, it said. And the UK has said it is reducing annual aid by US$7.6 billion, redirecting government money towards defence. Based on recent announcements, overall official development finance to Southeast Asia will fall by more than US$2 billion by 2026, the study projected. 'These cuts will hit Southeast Asia hard,' it said. 'Poorer countries and social sector priorities such as health, education, and civil society support that rely on bilateral aid funding are likely to lose out the most.' Higher-income countries already capture most of the region's official development finance, said the institute's Southeast Asia Aid Map report. Poorer countries such as East Timor, Cambodia, Laos and Myanmar are being left behind, creating a deepening divide that could undermine long-term stability, equity and resilience, it warned. Despite substantial economic development across most of Southeast Asia, around 86 million people still live on less than US$3.65 a day, it said. 'Global concern' 'The centre of gravity in Southeast Asia's development finance landscape looks set to drift East, notably to Beijing but also Tokyo and Seoul,' the study said. As trade ties with the US have weakened, Southeast Asian countries' development options could shrink, it said, leaving them with less leverage to negotiate favourable terms with Beijing. 'China's relative importance as a development actor in the region will rise as Western development support recedes,' it said. Beijing's development finance to the region rose by US$1.6 billion to US$4.9 billion in 2023 – mostly through big infrastructure projects such as rail links in Indonesia and Malaysia, the report said. At the same time, China's infrastructure commitments to Southeast Asia surged fourfold to almost US$10 billion, largely due to the revival of the Kyaukphyu Deep Sea Port project in Myanmar. By contrast, Western alternative infrastructure projects had failed to materialise in recent years, the study said. 'Similarly, Western promises to support the region's clean energy transition have yet to translate into more projects on the ground – of global concern given coal-dependent Southeast Asia is a major source of rapidly growing carbon emissions.'
Arab News
20-07-2025
- Business
- Arab News
Global banking rules are failing emerging markets
In an era of shrinking resources for development finance, global policymakers must shift their focus to making better use of existing funds. Identifying and removing regulatory barriers that hinder the efficient deployment of capital to emerging markets and developing economies is a good place to start. The Basel III framework, developed in response to the 2008 global financial crisis, has played a crucial role in preventing another systemic collapse. But it has also inadvertently discouraged banks from financing infrastructure projects in emerging markets and developing economies. At the same time, advanced economies, with debt-to-gross domestic product ratios at historic highs, face mounting fiscal pressures. Servicing these debts consumes a growing share of public budgets just as governments must ramp up defense spending and boost economic competitiveness, resulting in cuts to foreign aid. Together, these pressures underscore the urgent need to mobilize more private capital for investment in emerging markets and developing economies. Building resilient and sustainable economies will require transformational investments across the developing world in infrastructure, technology, health and education. According to the UN Conference on Trade and Development, emerging markets and developing economies must raise more than $3 trillion annually beyond what they can raise through public revenues to meet critical development and climate targets. Amid these challenges, prudential regulation impedes the ability of emerging markets and developing economies to raise private capital. This issue can be traced back to the global financial crisis, which wiped out $15 trillion in global GDP between 2008 and 2011. Since the crisis stemmed from weak capital and liquidity controls, as well as the unchecked growth of innovative and opaque financial products, Basel III was designed to close regulatory loopholes and bolster oversight, particularly in response to the rise of the nonbank financial sector. While the revised framework addresses the vulnerabilities that triggered the 2008 crisis, its focus on advanced economies and systemically important financial institutions inadvertently imposes several requirements that restrict capital flows to emerging markets and developing economies. For example, Basel III requires banks to hold disproportionately high levels of capital to cover the perceived risks of financing infrastructure projects in emerging markets and developing economies. But these risks are often overestimated. The riskiest period of an infrastructure project is typically the preoperational phase. By the fifth year, when projects begin generating revenue, risks tend to decline significantly. In fact, the data suggests that, by year five, the marginal default rates for development loans are lower than those for corporate loans extended to investment-grade borrowers. But despite the lower risk profile, banks are required to hold more capital against development finance loans than they do against loans to unrated companies over the life of the project. Insurers encounter similar regulatory barriers. Under the EU's Solvency II framework, an insurer investing in an emerging market and developing economy infrastructure project faces a capital charge of 49 percent — nearly double the 25 percent required for a comparable project in an Organisation for Economic Co-operation and Development country. Yet there is no empirical justification for this unequal treatment. Historical data show that infrastructure loans in emerging markets and developing economies perform just as well as those in advanced economies. Even when multilateral development banks share the risk, the resulting exposures often remain subject to a 100 percent capital charge. Vera Songwe, Jendayi Frazer and Peter Blair Henry The significantly higher capital costs that banks incur when making infrastructure loans to emerging markets and developing economies deter them from supporting transformative, high-impact projects, steering capital toward safer, low-impact investments. Blended finance — often touted as a promising path to de-risking investments to emerging markets and developing economies — is also hampered by prudential regulations that impede effective collaboration between multilateral development banks and private sector entities. Multilateral development banks, backed by guarantees from developed economy shareholders and AAA credit ratings, can help reduce capital costs by co-financing projects in emerging markets and developing economies and providing lenders with additional assurances. But even when multilateral development banks share the risk, the resulting exposures often remain subject to a 100 percent capital charge, undermining the very benefits that multilateral engagement is meant to provide. Moreover, only a limited number of multilateral development banks currently qualify for zero percent risk weighting under Basel III. Expanding the list would enable commercial banks to work with a broader range of multilateral development banks, increasing the impact of each taxpayer dollar invested in development aid. Compounding the problem, even eligible multilateral development banks are required to provide an 'unconditional' guarantee for a zero percent risk weight to apply. But it remains unclear how regulators define unconditional and this ambiguity prevents commercial banks from making full use of multinational development bank risk-sharing tools. To be sure, Basel III's foundational principles are sound. Capital buffers and liquidity ratios that reflect institutional risk profiles are essential for maintaining financial stability. But several rules within the otherwise well-designed Basel III framework limit emerging markets and developing economies' ability to pursue sustainable development while doing little to mitigate systemic risk. At a time when net capital inflows to emerging markets and developing economies are declining due to debt-service obligations to advanced-economy creditors, prudential regulations must not inadvertently impede private capital flows to productive projects in these countries. To improve the regulatory framework for emerging markets and developing economies, the G20 must take four key actions as a platform for cooperative leadership. First, recalibrate capital requirements for infrastructure project finance to reflect real-world default performance, particularly in the postconstruction phase. Second, expand the list of multilateral development banks eligible for zero percent risk-weighting under Basel III to include high-performing regional institutions, such as the Africa Finance Corporation, which have investment-grade ratings. Third, clarify the definition of 'unconditional guarantees' so that more multilateral development bank-backed risk-sharing instruments can qualify for favorable regulatory treatment. And lastly, introduce capital charge discounts for blended finance structures co-financed by A-rated institutions, with the level of discount varying by rating. These reforms do not require new taxpayer commitments; they simply align regulation with actual risk. Implementing them would crowd in more private investment, reduce borrowing costs for developing countries and accelerate progress toward transformative development that creates much-needed jobs. The G20 must address these regulatory roadblocks so that capital can flow to where it delivers the greatest value. Reaching consensus on how to lower capital costs for emerging-market economies is one of the top priorities for G20 finance chiefs. Reforming the Basel III framework would be a relatively low-cost, high-impact way to mobilize investment, drive job creation and support sustainable growth.
Japan Times
04-07-2025
- Business
- Japan Times
Blistering heat and empty chairs mar U.N.'s flagship development event
Brutal heat scorched Spain this week, a blistering reminder of the climate change that is battering the world's poorest countries — stretching their finances even as government debt climbs to new heights. But at a once-a-decade U.N. development finance conference in Seville, two key ingredients were in less abundance: money and power. Just one Group of Seven leader — French President Emmanuel Macron — attended the event, where he and Spanish Prime Minister Pedro Sanchez addressed rooms with dozens of empty chairs. Organizers initially said they expected 70 heads of state; that was whittled to 50 as the conference got underway. Back in Washington, Paris, London and Berlin, rich-country leaders are slashing aid and cutting bilateral lending in a pivot to defense spending and rising debt at home. "The mood is ... I would say realistic, but also a sense of unity and of pragmatism," said Alvaro Lario, president of the International Fund of Agricultural Development, adding that the question on everyone's mind this week was how to do more with less. "How can we come together, or think out of the box, or create new type of ways of really stretching it more?" The Financing For Development meeting is a flagship U.N. conference, charting the trajectory to help tackle changes the world must make to tax policies, aid spending or key areas such as debt, health and education. Its outcomes guide global aid funding and U.N. policies for the decade to come. Few disagree over the need for action. Hundred-year floods and storms are happening with alarming regularity, and rising debt-servicing costs are siphoning money away from health, education and infrastructure spending in the developing world. Spanish Prime Minister Pedro Sanchez delivers a speech during the close of the U.N. conference in Seville on Thursday. | AFP-Jiji But even top developing-world leaders such as Mia Mottley, the Barbados prime minister and a prominent global climate champion, and South African President Cyril Ramaphosa, currently chairing the Group of 20 major economies, backed out of the event at the last minute. The media room was stacked with Spanish press gossiping about a domestic political scandal while disillusioned civil-society leaders stalked the halls, upset with the watered-down agenda and the lack of fiscal or political firepower. "We are facing a backsliding of many agendas that we had advanced a few years ago," said Henrique Frota, director of ABONG, a Brazilian association of NGOs. "Developed countries are reducing their investment in (official development assistance) and European countries are not fulfilling their commitment ... they are giving less and less money right now for every kind of agenda." Event leaders were relieved to produce an outcome document — despite gnawing fears in the past months that Washington would torpedo any deal. In the end, U.S. officials backed out altogether. "The entire community was very afraid of coming here because one country wasn't attending," said U.N. Assistant Secretary-General Marcos Neto. "But the document ended up working out ... I'm leaving happy, with more optimism than I thought I would leave with." Neto highlighted significant steps toward implementing climate and development goals, including the Seville Platform and multiple agreements from public and private sectors to leverage funds for the biggest possible impact. A woman carries an umbrella near Las Setas during a heat wave in Seville on July 2. | REUTERS The Seville Commitment included tripling multilateral lending capacity, debt relief, a push to boost tax-to-gross domestic product ratios to at least 15%, and get more rich countries to let the International Monetary Fund use "special drawing rights" money for countries that need it most. But in Seville, only host nation Spain signed on to commit 50% of its special drawing rights funds for the purpose. U.N. Deputy Secretary-General Amina J. Mohammed acknowledged that the attendance was not as star-studded as hoped, and that public funds are under pressure. "But there's innovative financing, there's the private sector, there's the triple lending of MDBs... so the resources are there," she said, referring to multilateral development banks. "We just have to have the political will to leverage through these mechanisms that have come out of the platform of action and continue moving with them." U.S. President Donald Trump, despite his country's absence, loomed large over the event; his climate change skepticism, hostility toward diversity initiatives and pledge to review U.S. participation in multilateral organizations made some keen to strip out references to climate change and rebrand initiatives as focused on resilience, education or health. Still, some said the gloomy backdrop should not deter leaders focused on progress. "Ultimately the important thing is doing it," said Jose Vinals, a former group chairman of Standard Chartered and cochair of both the FFD4 Business Steering Committee and the Global Investors for Sustainable Development Alliance. "The private sector is, for the most part, still willing to walk the talk."
Reuters
04-07-2025
- Business
- Reuters
Blistering heat, empty chairs and the C-word mar UN's flagship development event
SEVILLE, July 4 (Reuters) - Brutal heat scorched Spain this week, a blistering reminder of the climate change that is battering the world's poorest countries - stretching their finances even as government debt climbs to new heights. But at a once-a-decade UN development finance conference in Seville, two key ingredients were in less abundance: money and power. Just one G7 leader - France's Emmanuel Macron - attended the event, where he and Spanish Prime Minister Pedro Sanchez addressed rooms filled with dozens of empty chairs. Organisers initially said they expected 70 heads of state; that was whittled to 50 as the conference got underway. Back in Washington, Paris, London and Berlin, rich-country leaders are slashing aid and cutting bilateral lending in a pivot to defence spending and rising debt at home. "The mood is ... I would say realistic, but also a sense of unity and of pragmatism," said Alvaro Lario, president of the International Fund of Agricultural Development, adding the question on everyone's mind this week was how to do more with less. "How can we come together, or think out of the box, or create new type of ways of really stretching it more?" The Financing For Development meeting is a flagship UN conference, charting the trajectory to help tackle changes the world must make to tax policies, aid spending or key areas such as debt, health and education. Its outcomes guide global aid funding and UN policies for the decade to come. Few disagree over the need for action; hundred-year floods and storms are happening with alarming regularity, and rising debt-servicing costs are siphoning money away from health, education and infrastructure spending in the developing world. But even top developing-world leaders Mia Mottley, the Barbados prime minister and prominent global climate champion, and South African President Cyril Ramaphosa, currently chairing the Group of 20 major economies, backed out of the event at the last minute. The media room was stacked with bored-looking Spanish press gossiping about a domestic political scandal while disillusioned civil-society leaders stalked the halls, upset with the watered-down agenda and the lack of fiscal or political firepower. "We are facing a backsliding of many agendas that we had advanced a few years ago," said Henrique Frota, director of ABONG, a Brazilian association of NGOs. "Developed countries are reducing their investment in (official development assistance) and European countries are not fulfilling their commitment ... they are giving less and less money right now for every kind of agenda." Event leaders were relieved to produce an outcome document - despite gnawing fears in the past months that Washington would torpedo any deal. In the end, U.S. officials backed out altogether. "The entire community was very afraid of coming here because one country wasn't attending," said UN Assistant Secretary General Marcos Neto. "But the document ended up working out ... I'm leaving happy, with more optimism than I thought I would leave with." Neto highlighted significant steps toward implementing climate and development goals, including the Seville Platform and multiple agreements from public and private sectors to leverage funds for the biggest possible impact. The Seville Commitment included tripling multilateral lending capacity, debt relief, a push to boost tax-to-GDP ratios to at least 15%, and get more rich countries to let the IMF use "special drawing rights" money for countries that need it most. But in Seville, only host nation Spain signed on to commit 50% of its "Special Drawing Rights" for the purpose. UN Deputy Secretary-General Amina J. Mohammed acknowledged that the attendance was not as star-studded as hoped, and that public funds are under pressure. "But there's innovative financing, there's the private sector, there's the triple lending of MDBs ... so the resources are there," she said. "We just have to have the political will to leverage through these mechanisms that have come out of the platform of action and continue moving with them." U.S. President Donald Trump, despite his country's absence, loomed large over the event; his climate change scepticism, hostility toward diversity initiatives and pledge to review U.S. participation in multilateral organizations made some keen to strip the "c-word" - climate change - and rebrand initiatives as focused on resilience, education or health. Still, some say the gloomy backdrop should not deter leaders focused on progress. "Ultimately the important thing is doing it," said Jose Vinals, former group chairman of Standard Chartered and co-chair of both the FFD4 Business Steering Committee and the Global Investors for Sustainable Development Alliance. "The private sector is, for the most part, still willing to walk the talk."
