The Finance Minister, Seth Terkper has strongly indicated that the government is seriously considering issuing diaspora bonds to raise cheaper funds in a bid to tap into the wealth of Ghanaian emigrants after the country’s first domestic dollar bond issued recently was deemed a success.

“Diapora Bonds is feasible. We are looking at it. Everything is feasible with planning and with stabilization of the economy.

“There have been long standing suggestions that we should be doing diaspora bonds given the large number of Ghanaians who are living outside. We are going to see the extent to which there could be an interest in Diasporans who are holding money,” said Mr. Terkper at a media interaction in Accra.,”

“These are all just plans. We are not going to rush into it but we could see whether this could be a step towards making them buy bonds,” he added.

Such bonds, he said, have been successful when a particular group of people from a country living abroad are targeted to invest in the bonds aimed at raising funds to support growth of the economy.

“The Diaspora Bond is for residents who are in the diaspora or who are outside and have resources like someone living in the US and earning dollars. So, you can look at this group and target them and give them an instrument, just like a bond, just as we have the sovereign bond or the corporate bond,” Terkper explained.

He indicated that Diapora funds constitute a significant amount of inflows into the economy. “It’s about the third or fourth largest source of foreign exchange into the country. With such bonds there should be a number of roadshows and awareness creation to assure investors of repayment and also understand that their monies will be safe.”

A report by the Chief Economist Complex of the African Development Bank Group, confirms that issuing Diaspora bonds may well give Ghana an alternative to donor funds and help it fill the yawning infrastructure gap. It has been proposed over the years that Africa could tap into an estimated US$53billion, being the savings of an estimated 140 million Africans living outside the continent, according to a paper titled “Diaspora Bonds: Some lessons for African countries”.

Drawing lessons from Diaspora bond issuances in Israel, Ethiopia and India, the paper said tapping into migration wealth could be an effective means of funding development on the African continent. In May 2012, Mr. Terkper, then deputy Finance Minister, told the B&FT that government might sell a Diaspora bond to build infrastructure if the conditions were favourable and competitive.

“In fact, to the extent that Ghanaians living outside send money to buy Treasury bills, three-year bonds and five-year bonds, it’s a Diaspora bond except that we haven't designated it as such. “The size of Ghana’s Diaspora makes a Diaspora bond an attractive proposition,” he added.

At least one million Ghanaians live abroad, according to a 2005 study by researchers from the Institute for the Study of International Migration and Inter-American Dialogue. Bonds are a debt security instrument with a maturity of more than one year, tradable on the financial markets.

Diaspora bonds are issued by a country to its own Diaspora to tap into their assets in the destination country - as an alternative to borrowing from the international capital market, multilateral finance institutions or bilaterally from governments. The practice goes back to the 1930s in China and Japan, and was later followed by Israel and India in the 1950s. Diaspora bonds are typically used as project financing tools for public-sector, large-scale infrastructure development. Generally, they are to be used by a country to implement its development strategy, the report said. Lately, the World Bank has been advising countries about Diaspora bonds, arguing that while remittances help countries like Ghana benefit from the incomes of their emigrant populations, Diaspora bonds are a means to tap into their savings, too.