Diaspora Investment Partnership - Sida Lab

The Diaspora Investment Partnership initiative is expected to activate diaspora remittances and networks with the long-term goal to contribute to sustainable sources of financing and capital for start-ups and MSMEs to drive job creation and enhance entrepreneurial capacity and sustainable development opportunities in developing countries. The initiative will be tested during a pilot phase. The pilot will focus on Kenya but activities, including analysis and partnership, will also be implemented in Somalia and Ethiopia. A potential scaling-up will also include the full pilot in Somalia Ethiopia (i.e. design and test of digital platform). The hypothesis is that there is an information asymmetry and a need to develop more formal and structured means of connecting MSMEs and start-ups that require capital and financing with the diaspora and their networks in a sustainable and effective manner. Not only should the diaspora have the means to easily access information regarding potential businesses in which to invest, but they should also receive the necessary assurances that the businesses in which they would invest have undergone some background check and viability validation. This would be done in a de-risked and transparent environment, where risk is spread across multiple investments, thereby breaking down the potential information asymmetries and market challenges. The project will take the form of a pilot, and Sida’s contribution of MSEK 4 850 000 will be used to de-risk the initiative, as well as to enable design, innovation and testing of technical solutions and tools. The project will also explore new forms of collaboration and partnerships. The pilot will cover a 12-month period after which there is potential to, if the initiative proves successful, scale to more countries and diasporas. The Pangea Trust will be Sida’s implementing partner. The overall mission of Pangea Trust is to accelerate and contribute to the creation of an enabling environment, where African entrepreneurs can develop competences and gain access to relevant networks and capital in order to reach their full potential. By leveraging (1) Pangea Trust´s knowledge of and presence in the pilot’s target market(s), (2) their providing access to relevant local and regional strategic partners (to become engaged directly and/or as silent partners), as well as (3) an already established network within the Nordic diaspora, the platforms are expected to not only break down the information asymmetry, but also to mitigate attendant risks. In effect, the initiative is expected to hold the potential to catalyse more diaspora investments through an eventual crowding-in effect. Sida has a long-term ambition to pave the way for a global scale-up rather than creating another stand-alone initiative.