Bangladesh witnessed a remarkable surge in remittances from its expatriates, reaching a new high of $35.56 billion in the recently concluded fiscal year, marking a 17.3% increase from the previous year. Despite this substantial inflow of $35 billion annually, only a small fraction, approximately 5%, has been channeled into investments within the country.
The limited investment retention is not due to a lack of financial resources or interest among the diaspora but rather stems from the absence of attractive investment opportunities in Bangladesh. The existing expatriate bonds, including the Wage Earner Development Bond and two dollar bonds, primarily function as savings certificates with fixed rates, denominated in the local currency, and are not tradeable assets abroad. The removal of the investment ceiling in December 2024 led to a trend of redemptions, with net sales showing negative figures for three consecutive years. In FY24 alone, expatriates withdrew Tk 1,913 crore more than they had initially invested.
Comparing the situation to other nations, countries like Israel and Nigeria have successfully leveraged diaspora bonds to attract investments. For instance, Israel initiated its diaspora bond program in 1951, raising over $54 billion, while Nigeria’s diaspora bond in 2017 garnered $300 million due to its market-based approach and international regulatory compliance.
To address the trust deficit and enhance diaspora investment, there is a call for Bangladesh to introduce internationally registered diaspora bonds listed on global platforms, priced competitively, and dedicated to specific infrastructure projects. By offering such market-oriented instruments, Bangladesh can tap into the potential of its diaspora capital and foster sustainable investment inflows.
As the government finalizes its new diaspora policy, emphasizing the importance of trust-building measures like registration in investors’ home countries, independent oversight, market-driven returns, and transparent fund utilization can pave the way for attracting diaspora investments. Introducing diaspora bonds as a progressive step can create a conducive environment for the diaspora to contribute significantly to Bangladesh’s economic development.
The call to provide expatriates with investment opportunities that align with international standards and market expectations echoes the sentiment that offering a robust financial instrument can encourage the retention of a portion of the substantial remittances flowing into Bangladesh annually.
[The writer, an investment banker and managing director at RetailBook, can be contacted at [email protected]]