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USAID to Support African Diaspora Development Fund
December 4, 2012

By Kathryn McConnell
IIP Staff Writer
December 3, 2012

A smiling woman with two children
Remittances from the African diaspora support economic growth and increased spending on health, education and nutrition.

The U.S. Agency for International Development has agreed to support an African Development Bank fund that helps members of the diaspora in the United States promote development in Africa and improve the flow of worker remittances.

The Migration and Development Fund will award up to $500,000 to financial institutions or network associations in West or Central Africa that propose innovations aimed at boosting local development, increasing investment in migrant home countries in Africa, or promoting regulatory reforms that affect money transfers. The fund aims to scale up its capacity-building efforts in the financial sector to benefit low-income Africans, according to a USAID press release.

Proposals must show evidence of building wealth or creating jobs in Africa, and of reducing informal financial practices, according to the development bank. In addition, proposal sponsors must be registered within Africa, the bank said in a press release.

“We are doing this to encourage members of the African diaspora to build on the social capital of their countries of origin in their local communities as well as their host societies,” said Rafael Jabba, the fund’s coordinator.

About 30 million Africans have migrated to other countries in Africa or to other continents, according to USAID. This group “holds tremendous potential for the development of Africa as indicated by a strong flow of remittances,” it stated. Remittances are the continent’s largest source of net foreign inflows after foreign direct investment, which approaches $80 billion. Remittance flows to Africa quadrupled between 1990 and 2010, to nearly $40 billion, USAID said.

However, the cost of sending remittances to sub-Saharan Africa is the highest in the developing world, USAID noted. The fund will address this cost by encouraging competition among money transfer operators, by supporting a regulatory framework and by backing the introduction of innovative technologies.

Remittances support economic growth and increased spending on health, education and nutrition, which contribute to long-term productivity gains, diversify sources of household income and function as insurance against shocks, USAID said.