A rport by the Chief Economist Complex of the African Development Bank Group has affirmed that issuing Diaspora bonds may well give Ghana a readier alternative to donor funds, and help it fill the yawning infrastructure gap.

Africa could tap into an estimated US$53billion, being the savings of an estimated 140 million Africans living outside the continent, according to the paper titled “Diaspora Bonds: some Lessons for African Countries”.

Drawing lessons from Diaspora bond issuances in Israel, Ethiopia and India; the paper said tapping into migration wealth could be an effective means of funding development on the African continent.

In May 2012, Finance Minister Seth Terkpe, then deputy, told B&FT that government might sell a Diaspora bond or a second sovereign bond to build infrastructure if the conditions were favourable and competitive.

“In fact, to the extent that Ghanaians living outside send money to buy Treasure Bills, three year bonds and five-year bonds, it’s a Diaspora bond except that we haven’t designed it as such,” the minister said. The size of Ghana’s Diaspora makes a Diaspora bond an attractive proposition, he said.

At least one million Ghanaians live abroad, according to a 2005 study by researchers from the Institute for the Study of International Migration and Inter-American Dialogue.

Bonds are a debt security instrument with a maturity of more than one year, tradable on the financial markets. Diaspora bonds are issued by a country to its own Diaspora to tap into their assets in the destination country – as an alternative to borrowing from the international capital market, multilateral finance institutions or bilaterally from governments.

The practice goes back to 1930s in China and Japan, and was later followed by Israel and India in the 1950s.

Diaspora bonds are typically used as project financing tools for public-sector, large-scale infrastructure development. Generally, they are to be used by a country to implement its development strategy, the report said.

Ghana last sold a sovereign bond – Eurobond – in 2007 to raise US$750 million at a coupon rate of 8.5%. Lately, the world, the World Bank has been advising countries about Diaspora bonds, arguing that while remittances help countries like Ghana benefit from the incomes of their emigrant-populations, Diaspora bonds are means to tap into their savings, too.

The structure and management of Diaspora bonds are further discussed in the paper , which suggest the African Development Bank’s expertise and its financial instruments, as well as its interest in co-financing projects, could help leverage African migrant resources for development.