[dropcap]C[/dropcap]aribbean people have always been mobile – travelling, settling and investing all over the world. Advances in transport and technology now allow for a far-flung Caribbean diaspora that can keep in touch with its roots and, in some cases, even contribute economically to the home islands. The World Bank estimates that the Caribbean diaspora numbers almost six million and, in 2012, these expats sent over US$7 billion home (US$29.2 million of this went to Saint Lucia, comprising 3.7% of the country’s GDP).
For some members of the diaspora, the desireto stay involved in their communities goes beyond just sending money back to their families. Many have invested in start-ups, purchased real estate, established businesses or simply donated money to philanthropic causes. In recent years, international development groups and Caribbean governments have begun to realise the purchasing power of the diaspora and are keen to tap into its potential as a driver of growth in the region.
WHO IS THE DIASPORA INVESTOR?
Nearly a quarter of Caribbean diaspora members have investible wealth of over US$100,000, according to a 2013 study from infoDev. On the whole, Caribbeans abroad are a well-educated, affluent and professionally successful group, making them savvy investors and shrewd businesspeople. They are also highly engaged with the region, connected to their communities and eager to make a difference in terms of supporting social and economic causes. Many return home several times a year to mentor, volunteer or donate to local charities.
There are two types of diaspora investors, according to Dr Claire Nelson, President and Founder of the US-based Institute of Caribbean Studies (ICS): those who give to social causes and those who are investing for purely economic reasons. She says that both have a role to play in the region’s development and their interests can, and should, coincide: “Most of the diaspora are in social investment, others are supporting development projects and doing things like starting workshops and giving equipment. They want people to make something for themselves. They want to do good, and do well, at the same time.”
Traditionally diaspora investors have funnelled their money into a variety of industries from entertainment and the arts to real estate and manufacturing. Times are changing, however, and investors’ tastes are changing along with them. The diaspora is being drawn to sectors with the most innovation and movement, such as green energy, ICTs and agribusiness. And most are willing to look beyond their country of origin, taking a regional view to disperse their money in multi-island opportunities.
SMOOTHING THE WAY
While 85% of Caribbean diaspora members are interested in investing back home, only 13% actually do, according to infoDev. So why the disconnect?
Authors of the 2013 infoDev report ‘Diaspora Investing’, Qahir Dhanani and Mina Lee, say that expat investors are actively interested and looking for opportunities, but are prevented by systemic issues. “The diaspora firmly believe that lucrative investment opportunities exist, but that broader ecosystem issues constrain their uptake.” The economists further identified the top three barriers to investment as insufficient trust in entrepreneurs, complicated legal processes and quality of product or service.
Effective due diligence processes could help build trust between entrepreneurs and their financiers. Careful monitoring and consistent communication can build a rapport that offers both sides of the deal some security. In terms of the legal processes involved, investors would benefit from clear instruction, readily available information and co-operation from local regulators and stakeholders. Quality issues can be overcome with better training, education and standards. Start-ups with access to mentoring programmes and business incubators stand more chance of developing innovative, high-quality products.
AREAS OF OPPORTUNITY
By addressing the financing gap often faced by small businesses, diaspora investors can help deliver the holy grail of economic development – private sector-led growth. But before potential investors can address a need, they must first be aware of it. Lack of diaspora engagement often stems from a lack of awareness as small ventures go unnoticed by Caribbean investors living abroad.
Online platforms that link international investors with projects in the Caribbean help funnel diaspora investment to where it is most needed. These capitalise on the region’s widespread use of social media and internet connectivity while simultaneously leveraging the trend for crowdfunding alternative finance. They also pave the way for a co-ordinated approach of multiple investors coming together to support a single business. In this way, networks of angel investors could spread throughout the region.
Efforts to use such platforms have so far been limited. Although sites such as Kickstarter and GoFundMe have raised money for Caribbean causes, these are mostly philanthropic and small-scale ventures. One of the most promising platforms available to diaspora investors is LINK Caribbean’s Regional Angel Investor Network which was created last year with the aim of connecting high net worth individuals with start-ups and entrepreneurs.
Dr Nelson says an online platform model has potential but must first overcome the central issue of trust. Many diaspora members would be reluctant to invest in a deal at arm’s length, preferring a more intimate approach. Dr Nelson, who has over 25 years’ experience in international development, also wants to see more dialogue between the diaspora and agencies such as Caribbean Export and the World Bank, saying: “We need an inclusive approach. The shared future of the Caribbean region requires a shared vision. Looking at the diaspora as cash cows and putting things in place without asking them will not work. All of us have a part to play in the process.”
A FORCE FOR GOOD
Anyone familiar with the Caribbean knows that the region is home to innovative thinkers, creative trend-setters and budding business moguls. But getting that message out to the world isn’t always easy. According to economists Dhanani and Lee, engaging the diaspora provides an opportunity for the region to gain a foothold on the international stage: “In the long term, diaspora investments and their deals in the region can demonstrate to the rest of the world that the Caribbean has viable high-growth enterprises and is open for business.”
Dr Nelson agrees and says: “There has been a shift in the last two to three years of people seeing the diaspora as key to development. Governments now recognise that they are a bridge. They demonstrate that people are willing to invest in these countries. Small successes are going to have a ripple effect. It creates a buzz.”
Herself a member of the Jamaican diaspora, Dr Nelson believes that economic growth isn’t just a matter of mathematics. She wants to see more “impact investing” which asks “How does it make a difference on the ground?” and says: “Development is a state of mind. You cannot become what you do not believe in. The diaspora, who have always had a passion for their home countries and are committed to giving back, have a vision for the region [and] you need that spiritual capital to build the economy.”
