Diaspora bonds

Diaspora bonds are a type of government securities targeted at investors, which are attracted from among compatriots living abroad (diasporas).

This type of securities allows the state to provide a cheap inflow of new capital, maintain a sovereign credit rating, and also diversify the circle of investors, keeping the interest rate below the market level, because. these bonds are issued at the so-called "patriotic discount" (patriotic discount) and often during the economic crisis. This approach is based on the fact that the diaspora remains committed to its country of origin beyond its borders. Usually, the money raised by issuing this type of bond is directed to the development of infrastructure and defense of the host country, as well as to social projects that will not be attractive to investors who are trying to avoid risk.

At the same time, the diaspora receives a financial instrument that contributes to satisfying the desire of the diaspora members to support their country. In this case, such altruistic ambitions motivate holders to keep bonds in difficult times rather than sell them off. Thus, investors consider this type of bonds as charity. It is important to note that diaspora bonds as a financial instrument will be more effective if a significant part of the first generation diaspora lives in middle- and high-income countries.

This type of bonds has already been successfully placed by such countries as Israel, Nigeria and India.

Examples of such papers Nigeria, 5.625% 27jun2022, USD