Uganda’s plans for a diaspora bond have hit a snag, thanks to the low level of awareness, says a Bank of Uganda report 

“It may not be feasible to issue a
diaspora bond independently, as there
were concerns from the study about the
lack of a critical mass to fully subscribe
to this diaspora bond [hence the
awareness drive],” BoU assistant director
financial markets Arnold Bagubwagye
told a recent dialogue on Diaspora
Resource Mobilisation and Utilisation in Kampala.
Uganda will thus not follow in the
footsteps of Ethiopia, which has used
diaspora bonds to reduce the burden of
external borrowing for its infrastructure
projects since 2008.
According to Fekadu Ketema, head of
media and communications, Ethiopians
living abroad have purchased more than
600 million birr ($28.3 million) in bond
since the launch of the construction of
the Grand Ethiopian Renaissance Dam
(GERD) dam this year.
Some 110 million birr ($5.2 million) was
earned in the past six months alone.
Ethiopia’s first Diaspora bond was the
Millennium Corporate Bond to raise
funds for the Ethiopian Electric Power Corporation in 2008.
Experts argue that the diaspora bond
would help to ease Uganda’s heavy
borrowing from external financial
institutions, which have more stringent
requirements, some of them are very costly.
The World Bank’s 2013 data places
Uganda’s current external debt at
Ush13.7 trillion ($4 billion), while some
statistics indicate that the country’s
external and domestic debt is growing at
2 percentage points of GDP every year.
Experts say Ugandans in the diaspora
are a powerful resource in the
development of the economy through
their annual remittances, currently rated
at about $900 million.
BoU officials said that many Ugandans in
the diaspora opt to invest back home by
buying property and establishing small
businesses. A diaspora bond that is
regulated by a competent body would
spare Ugandans abroad the loss of their
savings through fraudulent deals.
Even as government devises means of
interesting the diaspora in investing
back home, it is faced with the challenge
of inadequate data on its nationals
abroad, such as their whereabouts,
earnings and savings culture.
Mr Bagubwagye adds that the other
challenge they are experiencing is the
difficulty in understanding some
financial instruments like bonds by the
diaspora.