Diaspora Bonds

The TZUK Diaspora Community’s Chamber of Commerce and Investment Department is looking to collaborate with the National Treasury and the Bank of Tanzania to structure and issue diaspora bonds, which can be instrumental in financing the emerging and developing economy of the country. Inspired by the success of India’s diaspora bond program in contributing to the development of the country, Tanzania seeks to leverage the patriotism and investment potential of its diaspora. Tanzanian Diasporas are a symbol of national pride, representing the country positively on the international stage.

Tanzania, as one of the developing countries rely on remittances and foreign direct investment as sources of funding. Remittance inflows to GDP (%) in Tanzania was reported at 0.52261 % in 2020, according to the World Bank collection of development indicators, compiled from officially recognized sources.

According to the World Bank’s Migration and Development Brief reports, 232 million people have sent remittances to their friends and families. The increasing volume of remittances has become a crucial source of support for non-residents looking to acquire assets in their home countries and for families and friends in times of need. For developing countries, gaining access to international and foreign debt markets is not always easy. Therefore, they often depend on aid to address various needs, such as infrastructure development and disaster relief.

However, due to limited credibility, inability to back assets, and political instability, developing countries often struggle to obtain the capital needed for essential projects. One significant benefit of diaspora bonds is that countries can raise low-cost capital through patriotism. Expatriates may overlook shortcomings in the financial stability of Tanzania because of the government’s commitment to and desire for the development of its people. By helping their home country’s economic growth, expatriates may be willing to accept below-average investment yields in diaspora bonds with long-term maturities. Provided they hold patriotism and knowledge of our motherland, these bonds can offer an alternative to low-risk foreign treasury bonds.To encourage Tanzanian Diasporas abroad to contribute to the country’s development, the Tanzanian treasury could establish a collaborative scheme with them, wherein those holding Tanzanian passport, Special Status (SS) or Dual Citizenship (DC) are recognized as taxpayers or are required to pay fees to the government.

To implement this, the Tanzanian government could work with developed countries and request a portion of the income tax that Tanzanian Diasporas pay in those countries to be allocated towards development projects in Tanzania. Such a scheme would not only generate revenue for the country but also strengthen the relationship between Tanzania and its diaspora community.

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