The government is working to float two diaspora bonds for channelling remittances from non-resident Bangladeshis (NRBs) into productive investments, officials said, as much of their hard-earned money goes for subsistence uses.
Of the couple of bonds, one is meant for financing local development projects which could have a public-private partnership potential as well as wider employment-generation impact. The other one, namely 'PKSF diaspora bond', is to fund micro-enterprise development.
The Asian Development Bank (ADB) will help the government in floating the bonds by providing 50 per cent capital guarantee. The central bank will issue the sovereign diaspora bonds and the ADB will provide $150 million in loan for this purpose, the sources said.
They said the bonds would target the Bangladeshi diaspora community through a three-pronged outreach programme-social media, television advertising, and print media in key magazines.
 The target groups are high net worth (HNW) individuals and families and retail diasporas.
The bonds directed at HNW will be available via private distribution platforms and private banks and the ones directed at retail Bangladeshis will be listed with the local regulators and distributed through locally-listed brokers.Â
The ADB conducted a feasibility study on mobilising remittances and diaspora resources for development in Bangladesh under its regional technical-assistance programme which found out that the country was yet to maximise potential of remittances.
"If properly intermediated, remittances can be a significant source for productive investments and contribute to the country's further growth," the ADB said in aide- memoire on a project titled 'Facilitating Remittances and Diaspora Investments for Development'.
The memoire says Bangladesh received nearly US$15 billion worth of remittances, equivalent to 8 per cent of the country's gross domestic product, in 2014. In general remittances have contributed to rural household spending on food, housing, education, and healthcare.Â
Poverty incidence expressed as percentage of the population living below the national poverty line declined from 40 per cent in 2006 to 31 per cent in 2015 partly because of the increased remittance inflow especially in the rural areas. Remittances continue to be an important foreign-exchange source of the country, the ADB noted. Â Â Â Â
However, the ADB said, despite those remittances' significant contribution, the country has yet to maximise its potential.
"Bangladesh has extensive networks of banks and money-transfer companies, but most of the remittances are cash-to-cash remittances and not properly intermediated in the financial system," it said to focus the untapped benefit that the economy could draw from the wage earners' money.
It is important to enhance access to formal remittance services, especially for the poor and low-income segment of the population in rural areas, and develop instruments to capture remittances and diaspora resources to channel into productive investments.
In addition to low-and semi-skilled migrant workers, the ADB says, Bangladesh has wealthy diaspora populations in developed countries, including the United States, Canada and the United Kingdom. Â "The majority of these diaspora show a keen interest in investing 'back home' in a structured way."
The aid memoire says the project aims to raise $100 million to $200 million through such sovereign diaspora bond issuance over a test period of 12 months.Â
It will also support the country's financial sector's capacity to structure remittance future flow securitisation to mobilise capital for catering long-term investment needs like infrastructure.
The PKSF diaspora bond could yield 10 per cent to 15 per cent with maturities of three to five years on a rolling basis to invest in micro-enterprises through PKSF's partner organisations. The bonds will be repaid from the returns on micro-enterprise loans which can typically carry 20-25 per cent interest.Â
The ADB expects that PKSF will be able to raise between $25 million and $50 million in fresh capital following a comprehensive marketing campaign of a duration of six months.Â
syful-islam@outlook.com
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