The Diaspora Bond Proposal in Kenya: A State of Affairs Debates
The recent Kenya’s attempted to bring into context a financing model in the form of diaspora bond for infrastructure has raised stir among the citizens in the country and across the globe. Unveiled by the then Prime, Cabinet Secretary, Musalia Mudavadi during the Diaspora Day celebration held at the Kenyatta International Convention Centre (KICC). The program is meant to harness on the remittances from the Diaspora, which stands at a record $4billion (Sh520 billion from January to October 2024.
The government hopes that these funds will be used to fund infrastructure projects that can transform the country such as highways, power plants and water systems with a view of cutting on foreign expensive loans hence encouraging economic self reliance.
Government’s Vision
The government believes that diaspora remittance that currently stands at $7 billion could hit Sh1 trillion by 2027 to cement the shilling and boost development. The diaspora bond is aimed at mobilizing low cost funds as a source of financing as well as providing Kenyans living in foreign countries with a secure investment outlet.
Support for the Proposal
Some have noted that this is a one of a kind chance for Kenya to institutionalize a new source of incremental funding, thus easing fiscal stress. Explaining the nature of the scheme, financial gurus have viewed the initiative as a better prospect to foreign loans through considering following benefits; Lower rate of lending compare to foreign loans, Long repayment period for the borrow.
Such high remittance numbers depict the financial might of diaspora, which has substantially funded health, education, housing and most areas of rural development. Some of them involved with this issue hope to see this impact taken to national projects so as to facilitate development and reap the benefits in the long-run.
Concerns and Criticism
However, some people have questioned it, and so it has not been implemented as proposed below: Skeptics argue that Kenya has a history of embezzlement of public funds; the government’s capacity to realize its identified projects is questionable.
Critics attributed the social bond could raised Kenya’s high public debt if corruption is not tackled and checks instituted. But there were also questions about what precisely the bond would bring to investors and the entire economy.
Opportunities and Challenges
The diaspora bond’s success depends on several factors:
Transparency: The valiant effort sheds particularity to a definition of term and the implementation of such to keep investor confidence intact and in due course, update as needs be.
Accountability: A strong framework to check cases of embezzlement and fraud.
Delivery: To familiarise clients with our services and establish credibility, timely and effective implementation of projects.
Investor Trust: To persuade the diaspora that their hard earned money will lead to developmental changes for the better.
Countries such as Israel and India have also applied diaspora bonds and hence the case for Kenya is feasible. Nevertheless, the challenge that is likely to persist is trust because it was eroded in previous management of similar projects.
The idea of Kenyan diaspora bond is an indicative of the government of Kenya’s quest to mobilise the financial resource of the diaspora community for the nation’s development. That said, the opportunity to provide access to more innovative funding sources is commendable and could be boosted by optimizing such factors as the state’s capacity to resolve the existing concerns on transparency and accountability of project implementation.
The debate a manifestation of a more general and recurring problem in economic development trying to strike the right balance between the ambitious goal and the need to be credible and attract investors. If well implemented, the diaspora bond could change the way and manner of financing infrastructure in Kenya and open a new chapter of financing infrastructure within the country.