Tag Archive | OPIC

The trouble with relying on the diaspora

OPIC and other organizations have begun to realize the potential benefits of partnering with the diaspora (particularly the African diaspora) to finance and implement risky projects. Diaspora investors, as OPIC’s Executive VP pointed out, are often better than the average investor because:

  • They have a better understanding of what risks they’re dealing with
  • They have more foresight and have a bigger stake in the long-term outcome than non-native investors solely interested in profits
  • They have a better network of connections in-country to help facilitate the project implementation and keep it going
  • They’re less likely to cave in and give up at the first signs of difficulty

However, this fails to point out the potential pitfalls on relying on diaspora finance alone: like most others in a globalized economy, diaspora lenders and investors are also affected by fluctuations in income and they can only do so much. How can you expect a working taxi driver from Pakistan to contribute the same amount in a boon economy as in a year where he makes an average of $30/day and has to support 5 kids? And sure, OPIC helps by buffering for risks, but it can only do so much. While relying on diaspora financing and projects is probably much better than working solely with an outside corporation, relying on the diaspora as the main source of investment seems careless on a continent (Africa) that needs as much investment from possible.

Skeptical but impressed.

OPIC sets record for investments in renewable resources in 2011

OPIC: a better way to do development?

I must admit that I’m far less familiar with the OPIC’s operations than with those of the World Bank, IMF, and other development finance institutions. However, OPIC (the Overseas Private Investment Corporation) might arguably be doing a greater service to society than these more well-known agencies.

For one, it’s been able to finance itself since its creation in 1971, something that can’t be said for most bodies that insure private businesses in high-risk areas like the DRC, Sudan, and post-revolution Egypt. Secondly, the money is used to fund private ventures rather than languishing in government coffers and being syphoned off by bloated bureaucracies. Thirdly, the funding is being targeted (at least from what I can tell) towards high-risk (high-need) areas that would otherwise lack access to high amounts of capital or insurance–something that is very often not the case for other aid coming from the U.S. (which has historically been directed towards areas of national security interest, towards keeping incumbent dictators in power, and generally ignoring areas of greatest need.) Political insurance and general loans are far less “sexy” than humanitarian aid, but I’m thankful that at least OPIC is dedicated towards providing these services.

I definitely wish that OPIC had more staff dedicated to examining the social and environmental ramifications of their investments (like the $200 million that went towards coal-fired power plants in Indonesia in 1995 or the $60 million that was used to fund silver and tin mining for an American corporation in Bolivia in 2005)…

But there were investments that I did like: