Mobilizing Diaspora Entrepreneurship for Development

Entrepreneurs are people with a unique combination of traits: They are attuned to market openings and the investment environment, alert to opportunity, innovative, and tolerant of risk.

Migrants may not be the first group that comes to mind when considering who is likely to become an entrepreneur. But emigrants and their descendents are, in fact, uniquely positioned to recognize investment opportunities in their countries of origin and to exploit such opportunities by taking advantage of their ties in two worlds.

Development practitioners and policymakers are beginning to examine the role of diaspora entrepreneurs in directing investments toward their home countries, thereby promoting economic growth. Compared with remittances or diaspora bonds, entrepreneurial investments give diaspora members more direct control over the use of their funds. And diaspora members are often more willing than nondiaspora investors to risk starting or engaging in business activities in high-risk or emerging markets. Moreover, their knowledge of the local political, economic, and cultural environment, as well as their personal connections and linguistic abilities, may give members of diasporas a “first mover” advantage when investing in or starting businesses in their countries of origin.

Despite the advantages of attracting diaspora direct investors and entrepreneurs to their countries, many developing countries have experienced only limited success in actually doing so, particularly those at war or experiencing internal conflict and social upheaval. Complicated tax laws, limited access to local financing, and corruption are all conditions that can deter individuals from pursuing economic activities in a given country and persuade them to look for opportunities elsewhere.

This article discusses the nature of diaspora entrepreneurship, the conditions that best create opportunities for diaspora direct investment in countries of origin, and the various strategies employed by some organizations to support diaspora entrepreneurs and their ventures.

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By Kathleen Newland and Hiroyuki Tanaka