Homestrings Diaspora Bond Programme

November 2016

The views expressed in this presentation are the views of the author and do not necessarily reflect the views or policies of the Asian Development
Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee
the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not
necessarily be consistent with ADB official terms. F
 01
Diaspora Capital

Contents The need for sovereigns to channel effectively

02
Diaspora Bonds
Introduction and explanation
3-7

8-9

03
Remittances
Outlining their background and the problems they pose 10-11

04
Remittances vs. Diaspora Bonds
Strengths and weaknesses 12

05
Case Study: Israel 13-14

06
The Homestrings Solution: Diaspora Bonds 15-20

07
Summary 21-23
Channeling Diaspora Capital
The issue for Sovereigns

The Challenges The Homestrings solution

Sourcing and channeling Our Diaspora Bond Programme can direct diaspora capital
towards fueling growth in the productive sector whilst
diaspora capital effectively engaging the global diaspora community
Fueling growth in the
productive sector Our toolkit of diaspora products includes:
Supplementing Foreign Direct Diaspora sovereign bonds
Tailored diaspora corporate bonds
Investment or Development
Migrant Endowment Savings Accounts (MESAs)
Finance
Remittance-backed bonds
Engaging the diaspora
Addressing high net worth
And are implemented through our:
diaspora vs. migrant worker
Web platform
participation
Network of institutional clients and banking
Accommodating regulatory relationships
issues Upcoming mobile app

3
Diaspora remittances
Huge sums of capital are flowing to Emerging Markets through key corridors

In 2014, remittances Significant remittance corridors to Emerging Markets, 2014 ($bn)

from the diaspora was
more than x3 greater than
external aid flows
$3.8bn
$2.1bn
$441bn
Remittances $2.7bn
$1.6bn
$1.9bn $2.0bn
US Jamaica $0.6bn
US Brazil $2.2bn
Germany Poland $3.7bn
$135bn France Morocco
UK Nigeria
Aid flows
Canada India

Flowing from OECD countries UK India

to developing economies and Saudi Sri Lanka

emerging markets Canada Philippines

Source: World Bank Global Remittances, Bilateral Matrix (2014)

4
Diaspora remittances
A stable and significant source of external finance to developing economies

Remittances vs. Development capital to developing economies* The rise of remittances since 1990 But
($bn)
remittances
800
$441 Billion are not fueling
700 the growth of
600
Volatile and
unpredictable $29 billion productive
500
Steady growth Increase to developing economies sectors in
receiving
400

300
> 1,400% Increase economies.

200 Clearly there is an emerging diaspora

sending huge sums of capital home
100
These flows are far less susceptible
0 to macroeconomic cycles such as
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 FDI and private debt and equity

Remittances FDI ODA Private debt & portfolio equity

SOURCE: World Bank Migration & Remittances Factbook 2016. NOTES: * developing economies as defined by World Bank

5
Fueling the engines of growth
Remittances do not yet affect material change in the receiving countries

Remittances and FDI ($Bn) vs. Female participation rates (%)

Lower middle income countries

Remittances have 300 100

However
become more 90 These remittances
important than FDI,
250
80 are not yet fueling
70 growth in
in emerging 200
60 productive sectors
markets, with over
150 50 e.g. female
$250Bn sent home
to lower middle
40 participation and
100
income countries,
30 enfranchisement
20 has remained flat
50
in 2014 10
0 0
2000 2002 2004 2006 2008 2010 2012 2014

remittances FDI female participation

SOURCE: World Bank Migration & Remittances Factbook 2016.

6
The Opportunity

Invest back home and make a difference

Eric Guichard started Homestrings in 2012 to solve a basic problem:

Facilitate Diaspora investment back in to The $140bn global
Africa, by identifying robust opportunities market opportunity

230 million USAID study

confirms that over
Expatriates
$441bn is repatriated annually Target market 80%
by expats back home, globally
of expatriates use
High
have access to the web to search
investments via private
net worth
banks & investment banks
for investment
opportunities in
$110bn (25%) Middle class: Our main focus: their home country.
doctors, engineers, opportunity /
is seeking investment lawyers under-serviced
in "home country.
(World Bank/IFA)
basic remittances
Migrant workers: serviced by Western
AFRICA: $15.0 billion/year Blue collar Union, World Remit
INDIA: $17.5 billion/year and others
CHINA: $12.5 billion/year

7
Diaspora Bonds
The Homestrings solution for effective diaspora investment

(Diaspora bonds are)
A debt instrument
issued by a country
Sovereign diaspora bonds are
usually issued either to raise
foreign exchange and balance of
payment funding for the state or 15 years
or potentially, a sub- A bond, either bearer or registered,
finances sovereign states or
to finance particular infrastructure
projects
sovereign entity or even impact-orientated projects in 5 Years
a private corporation
emerging or frontier markets

to raise financing from

its overseas diaspora. Diaspora bonds typically have a
coupon of at least
Dilip Ratha

3% p.a.
Manager of Migration & Remittances,
World Bank

and offers a reliable source of

revenue. However Israel, the
pioneer and leading distributor, Through Homestrings collaboration with DFIs, there can be a
often issues discounted-to-maturity shift towards diaspora bonds being used by impact enterprises
bonds with zero-coupons and supported with DFI guarantees or credit enhancements

8
Diaspora Bonds
What purpose do Diaspora Bonds serve in emerging markets?

Provide a conduit for remittances to flow back into projects and business that stimulate
1 national growth with positive impact

Re-orientate DFIs aid flows to specific high-impact enterprises through guarantees or

2 credit-enhancements, ensuring more effective and broader distribution of funding

Offer the 230+ million international migrants, overseas workers and remittance providers
3 with safe, long-term investment instruments, with better returns than banking deposits,
often supported with an A-rated guarantee or credit-enhancement

Address increasing urgency for OECD to direct remittances back into supporting
4 development to help achieve the targets set by the UNs 2030 Agenda for Sustainable
Development

Homestrings Diaspora Bonds aim to bring together migrants capital with companies and
5 communities in their homelands, hence re-engaging the diaspora with specific businesses
or projects

9
Remittances
Strengths and weaknesses

STRENGTHS weaknesses
Diaspora are transferring ideas, behaviours and values back Remittances are a short term fix; a quick and simple solution,
home through remittances appealing to migrants instinct to support close family and
loved ones

Remittances are the largest source of international financial Unofficial remittance flows are harder and harder to monitor
flow to Africa, which is extremely important because aid and have less impact on national growth
flows from OECD are diminishing
Transfer costs: in 2014 the average cost for global remittance
transfers of around $200 reached 8% (12% for Sub-Saharan
Sub-Saharan African remittances in 2014 reached $35 bn;
Africa)
a 600% increase since 2000

Global authorities scrutinising money movement fees and

transaction costs.
Remittances are ingrained in the diaspora habits and therefore
constitute reliable and established flows.
In June 2015, the Bank transfer
World Bank reported remittance 12.0%
that bank transfer
Remittance providers are increasingly seeking patriotic Account-to-account
remittance costs transfer 11.2%
and transparent investment opportunities were highest on
average Cost of sending cash 6.9%

10
Diaspora Bonds
Strengths and addressing the weaknesses of Remittances

STRENGTHS Addressing the weaknesses

of Remittances
Long-term benefits to both the issuers and the Diaspora bonds increase the transfer of value and ideas back to
source countries; educating migrants and their families about the
bondholders; improved access to capital for Emerging &
benefits of fixed income investing, the yield curves, the important
Frontier Market countries while offering long-term yield projects at home requiring financing and the utility of bonds as a
and returns to diaspora savings instrument
Diaspora bonds facilitate the exchange of knowledge, of projects
Educating diaspora on fixed-income opportunities and that matter, between diaspora and the hometown, providing a
the technical aspects of bond financings, increase flow sense of involvement beyond simple ethnicity
of ideas back home Crowdfunded bonds will encourage more active internet use by
migrant groups and we hope to foster Diaspora Investment Clubs
Creating communities of investors for Emerging &
The cost of investing in Bank transfer remittance 11.0%
Frontier Markets worldwide, particularly through diaspora bonds is lower Account-to-account
crowdfunding and internet investment through Homestrings transfer
11.2%
because of internet Cost of sending cash 6.9%
Diaspora gain access to early opportunities and best- distribution
Diaspora bonds 4.0%
performing fixed income markets
There are clear advantages of Diaspora bonds. E.g.
The diaspora bond programme will lower transactional Lower costs and fees
costs and provide a useful competition Provision of steady cash-flow of income from interest payments with
to the remittance transferors lower transfer costs
Provision of endowment-style interest and amortization schedule

11
 SWOT analysis summary
Remittances vs. Diaspora bonds

Remittances Diaspora bonds

Huge growth No yield or return New source of Increasing High yield & Access to Create a Bank and
Transfer ideas Hard to monitor finance when aid transfer costs return custody community of investment
and values Open to abuse flows diminish Compliance Low transfer Transparency of educated banking fees
Egregious fees Provide Regulation costs pricing investors Over-regulation
Often foundation for Easy prey to Improved capital Absence of trust Bring down costs
misdirected to innovative government market access for between Creating
spendthrift diaspora products levies and EM issuers diaspora and communities of
relatives licenses Educating home countries savers and
Difficulties in diaspora on e.g. Mexico, investors
monitoring lead financial products Nigeria Addresses social
to money- Easy to monitor issues of
laundering disenfranchised
migrant workers
Chance to build
trust between
diaspora and
home countries

strengths Weaknesses Opportunities THREATS strengths Weaknesses Opportunities THREATS

12
Diaspora Bonds success story: Israel
Part I what has Israel achieved?

Israel Bonds has raised
nearly $35 billion in
loansplay(ing) a
Israel has been issuing
annual bonds targeted
towards, but not limited to,
Israels Diaspora Bond Programme has been a huge success;

Contributing to national infrastructure projects

such as the National Water Carrier
diaspora living abroad as a
significant role in the means to reinvest in their
development of a home country and Helping maintain Israels credit rating; the
(Israeli) Government has a critical source
strong, resilient Israeli
community
of external liquidity (in) the Israel Bonds
Programme Moodys
economy.
Izzy Tapoohi These are development- Boosting exports through improvement in port
CEO Israel Bonds oriented borrowings with and transport networks
maturities from 1-10 years, Expanding R&D as Israel is one of worlds most
Since 1951 Israel has raised and fixed or floating vibrant startup hubs
more than coupons. SEC registered,

$35bn
non-negotiable, non- (Israel bonds) are a way to show faith in our
volatile growth, faith in our development and faith in our
future Reuven Rivlin, President of Israel
through diaspora bonds

SOURCE: Bank of Israel (2004).

13
Diaspora Bonds success story: Israel
Part II what have been their key success factors?

Complementary product Limited FX Risk

Short and medium-term
Bonds are bought in (US)
maturity bonds help to
dollars and repaid from dollar
complement the longer-term
sale proceeds
bonds offered by the Treasury

Trust and emotional ties

Competitive rates E-commerce platform
[It is the] Determination,
Bonds are sold at close to the Offers retails clients (75% of
confidence and pride (of the
same rates as those offered worldwide annual sales) greater
Israeli diaspora) that has made
publically by Israeli Treasury. ease of access
the Israel bonds enterprise so
Very cost-effective
successful

The Homestrings Diaspora Bond Programme builds on these key success factors

SOURCE: Israel Bonds CEO, Izzy Tapoohi (2012)

14
The Homestrings toolkit
Tools we introduce to create more options for diaspora

Homestrings
provides a toolkit
of products for
channeling diaspora
capital effectively
in order to drive the Products: Implemented through:
engines of growth Web platform
Diaspora sovereign bonds
in recipient countries
Tailored Diaspora corporate bonds Mobile app
MESAs (Migrant Endowment Our network of
Savings Account); pilot schemes to institutional clients
be sponsored and banking
Remittance-backed bonds relationships

15
The Homestrings Solution
What we provide to global diaspora

Platform
Homestrings provides a web-based bond programme, providing simple and secure way to invest
in home country

Return
Diaspora bonds provide a steady cash-flow from interest payments and amortisations with lower
transfer costs

Impact
Used to finance critical infrastructure projects such as hospitals, roads, bridges or power
generation. Also provides working-class migrants with the tools to create a foundation for savings

Community
Homestrings will develop a wider community of investors for Diaspora Bonds, cross-selling
between different groups including HNWIs, professional classes and migrant workers

Expertise
Homestrings is run by a team of driven and experienced finance professionals, with a track record
of successful execution across Emerging Markets at some of the top global investment banks

Security
Bond yields are benchmarked off the sovereign issuers credit-curve with credit enhancements
from A-rated sponsors

16
Homestrings Cluster Analysis
Identifying and engaging diaspora sets

We have a unique process Ability to construct global

to analyse and prioritise diaspora databases
diaspora datasets

Crowdfunding platform
Identify HNWIs and those
with disposable incomes Cluster
Socializing
Analysis
Conferences hosted
Networking via
by Homestrings
Development Finance
Institutions (DFIs)
Digital marketing

Outcomes:
Creating repeatable sources of diaspora capital
Identifying subsets within the diaspora who have particular investment interests e.g.
education/healthcare/infrastructure

17
Homestrings focus areas
Developing our target pipeline

Diaspora Dollar potential Partnerships Longer-term: high-potential

Homestrings coin the phrase Investment Promotion Agency, products
Diaspora Dollar to describe Embassies, Chambers of Homestrings is analyzing the
the potential to raise finance for Commerce and other official potential to develop other sources
countries with disproportionally sector entities e.g. British Council of diaspora dollar financing through
large migrant or expat Focus on the cultural habits and instruments like;
communities organizations of diaspora Remittance flow securitisation
Identifying the sovereign issuers Outreach programme through Migrant Endowment Savings
with the greatest needs while Conferences, webinars and Account
having strong Diaspora Dollar seminars Better understanding of
potential e.g. Ethiopia, Lebanon,
remittance flows and the
Iran and Armenia
diasporas hunger for more
Africa in general: the African intelligent investing
diaspora in North America alone
number more than 39 million

18
Diaspora Dollar
Identifying the potential for specific markets

Homestrings has a unique

Diaspora Dollar Scores (Example scores)
ability to grade sovereign
Quantitative Qualitative Overall
issuers with
Countries Remittances Diaspora Remittance Interest Interest Financial Diaspora
the greatest diaspora ($bn) (millions) per person in impact in return literacy dollar

dollar potential
71 13.8 $5,100

Diaspora dollar, a term

28 6 $4,667

coined by Homestrings, is 7.1 0.8 $8,754

the overall investing potential
of a set of diaspora (e.g. 1.6 0.8 $2,035
Lebanese living abroad).
0.6 0.7 $801
We use both quantitative and
qualitative criteria to give an 0.2 1.6 $150

overall diaspora dollar

grade Homestrings target

SOURCE: World Bank.

Notes:*Countries listed are (in order) India, Philippines, Lebanon, Armenia, Ethiopia and Iran. ** Investment size is an average given size of remittances and size of diaspora

19
 How Homestrings will build a diaspora community
Outreach

Homestrings grasps the importance of

understanding diasporas inclinations,
e.g. the emphasis on helping their
home community and not the country
or sovereigns Balance of Payments

LinkedIn, Facebook, Stressing cultural ties and

Twitter presence de-emphasizing the state
Social media The
and social Homestrings
networks Community Creating a network of
Current membership c.5,000 diaspora thought leaders
and educated investors that
but we expect to reach
100,000 within 2 years Homestrings evolves and grows under
Diaspora our guidance
E.g. Homestrings Zambia Community Homestrings dashboard
Conference 2015, new
Conferences scheduled Homestrings and tools
Events and
database
webinars
and CRM

For 2016 in Africa, partnership Provide cookie cutter

capabilities on many diaspora
discussions are on-going with
bonds and other diaspora-
Conference specialists
targeted instruments

20
Summary of Homestrings
Why use Homestrings?

Homestrings has a
Provides access to private investment opportunities in
5-year track record Emerging & Frontier markets through its web-based platform.
and is the first and
only EM-dedicated Deep skills in deal origination and distribution, offered through our
crowdfunding platform web platform and extensive network of existing clients

to digitally distribute
diaspora bonds. >20 Average experience of Management team in investment banking,
Years Emerging Markets and Development Finance
We are a London-based, FCA
regulated, integrated crowdfunding
and investment banking platform. Strong background in e-Commerce and lending-platforms.
Extensive experience in crowdfunding.

Homestrings is a leader in Emerging & Frontier Market

crowdfunding

21
 Homestrings.com
Accomplishments so far...

Proof of concept completed

2012 2013 2014 2015 2016

Homestrings begins Biggest deal closed: $2m raised Largest investor event: "Invest in First deal in CEE: Macedonia Homestrings retained by Asian
operations. for Duet West African Consumer Nigeria in London with 600 SME USAID guarantee Development Bank to advise
Growth PE tranche. registrants. backed bond: $250K. on diaspora funding in
First deal closed: Kenya Bangladesh and in Sri Lanka.
diaspora infrastructure bond First deal outside of Africa: African Financier of the Year First in-country event:
(water, roads and wind Australasia mining fund - $250K. Award - Association of African Investing in Ghana (2015) - Raise new capital and ramp
farms) $1m. Owned Enterprises (AAOE) - UK. 200 registrants. up EM expansion.
Harvard Business case study
published. Homestrings co-sponsors African
Diaspora Investment Symposium
Enterprise of the Year Award - in Washington, DC with USAID,
African Diaspora Awards, London. Calvert Foundation and DMA:
over 500 registrants.

Number of
594 1,193 3,114 4,291 >5,000
members

Key milestones and metrics through 2015

$
>5,000 250 50 35 $25M 12
Registered Deals Due Deals Raised Countries across
Members proposed diligences completed Africa and Eastern
(word-of-mouth) Europe

22
Summary

Remittances globally are

large and continuing to
Why Homestrings are the Number One choice when
grow but diaspora need considering a partner to arrange a Diaspora Bond:
innovative alternative 5 years of experience and demonstrating
investment instruments. Proof of Concept (see previous slide)
Team of fixed income specialists with niche
expertise in handling diaspora, issuers
needs and pricing EM bonds
Diaspora bonds offer Unique understanding of mechanics of
significant advantages as an Diaspora Bonds; including knowledge of
which sovereign issuers are best suited to
alternative to straightforward issue bonds and what the yield / pricing /
remittances, like lower costs tenor should be
and better returns targeted at Homestrings unique culture of identifying
appropriate issuers and the investment
high-impact borrowers.
community

23