Diaspora and Entrepreneurship by Saran Nurse

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Introduction

The term diaspora is used to refer to the ethnic minority groups, residing and acting in host countries but maintaining strong sentimental and material links with their countries- of- origin (Sheffer, 1986). Diasporas are described as either passive or active depending on the degree of connectedness to their homelands, and members organize contributions and philanthropic activities to their homelands either through diaspora organizations, faith community organizations and/or other informal means.

In proportion to its population, the Caribbean has one of the largest diasporic communities in the world with the United States accounting for as much as 75% of all Caribbean migrants (Nurse, 2011).  While the population of Guyana is close to 800,000, according to the latest American Community Survey figures, 140,000 Guyanese immigrants reside in New York City alone, making us the fifth largest foreign born population in the city.  It is estimated that the Guyanese diasporic community may be as much as half of the actual population of Guyana itself (Nurse & Kirton, 2014).

As was the case for the rest of the Caribbean, migration from Guyana occurred in two waves- the first in the 1950s and 1960s during the post-world war II boom, when shortages of unskilled and semiskilled labor in Western economies provided lucrative opportunities for skilled Caribbean migrants; and the second in the 1970s, propelled not only by the demand for professional service workers (teachers, nurses, doctors) in North America but also by political volatility, and economic and social decline in the region.  In the 1970s, when Guyana transitioned to a socialist government, unemployment and inflation skyrocketed, resulting in massive migration.  Today, migration from the country continues at high rates especially amongst the tertiary educated.  Along with Cuba, the Dominican Republic, Haiti and Jamaica, Guyana ranks as one of the top five labor exporting countries in the Caribbean region (Nurse & Kirton, 2014).

Economic theory states that migration could have a positive effect in countries with high unemployment by reducing pressure on labor markets, increasing the availability of jobs, and reducing poverty (Ionescu, 2006), if the main group of migrants are the non-essential employed.  However, the problem in the Caribbean is that it is the highly skilled that have, and continue to emigrate, resulting in reduced productivity in key specific sectors of the economy like information technology (IT), and creating labor gaps in these areas.  It is estimated that more than 24% of tertiary educated citizens of developing countries end up migrating (Newland & Plaza, 2013); in the case of Guyana this number, at 89%, is the highest in the world (Guyana Chronicle, 2015).

While some policymakers lament “brain drain”, and regard their migrants as losses, many have come to realize that their diaspora can be an asset (Newland & Plaza, 2013).  As is illustrated in many cases across the globe, diasporas can be germane to the economic development of small states like Guyana by helping to alleviate poverty, create employment, increase growth and human capital formation, spur innovation and entrepreneurship, and make a substantial contribution to a more favorable balance of payments position through remittances (Newland & Plaza, 2013).  In Guyana, the diaspora accounts for close to 70% of international visitors (Nurse, 2011) – Guyanese diaspora communities have helped with global expansion of local brands like El Dorado and XM Rum by providing lucrative customer bases in international markets, and remittances have been the fastest growing and most stable source of capital flow and foreign exchange for the country over the past decade.  In 2011, remittances totaled $400 M US, close to 12% of GDP, exceeding funds from Foreign Direct Investment (FDI) as well as Official Development Assistance (ODA) (Nurse & Kirton, 2014).  Remittances are primarily used for sources of immediate consumption and to fulfill short-term needs with very little expended on long term investment or small business development.  Given the skills, expertise, talent and other resources that lie in Guyana’s huge migrant population, it is imperative that policymakers find creative ways of leveraging the power of our diaspora for the betterment of the country.  It is posited here that one such method would be by engaging the diaspora to assist local business persons to establish and grow small and medium enterprises (SMEs) thereby developing a robust entrepreneurship sector.

Entrepreneurship and Economic Development

According to the Global Entrepreneurship Monitor, entrepreneurs can be classified as either “necessity entrepreneurs” who pursue self-employment due to lack of employment options, or “opportunity entrepreneurs” who reform and revolutionize the pattern of production (Samuelson, 1981).  While there is a positive correlation between entrepreneurship and economic development (Acs, 2006), the presence of a greater number of necessity entrepreneurs (as is the case of developing countries like Guyana) may actually not correlate with economic growth as it suggests that individuals are pursuing self-employment due to a paucity of employment options (Acs, 2006).  By definition, necessity entrepreneurs are usually more focused on their own survival and tend not to pursue business expansion, innovation or add to job creation.  Opportunity entrepreneurs, conversely, have a positive impact on economic development since they are more likely to pursue growth and scale, innovate and create jobs.  As an example, a local craft vendor who has a small shop and no employees may be content with generating enough income to just sustain herself and family (necessity entrepreneur).  If that vendor were to also create an on-line marketplace to sell her products, develop a new, innovative, transferrable on-line payment system, and hire employees, she has transformed from a necessity to opportunity entrepreneur, and will have a greater impact on the local economy.  To stimulate economic growth, policies that encourage the formation of more “opportunity” type entrepreneurs and allow for the conversion of necessity to opportunity entrepreneurs have the greatest impact.

The most obvious way for diasporans to contribute to economic development through entrepreneurship is through diaspora direct investment (DDI) – directly establishing businesses that are innovative, technologically intensive and creates jobs.  However, DDI is not the scope of this paper; rather this paper examines how members of the diaspora can impact the entrepreneurial sector of Guyana while still maintaining permanent homes in their countries-of -destination.  To this end, it is posited that diasporans can contribute towards the development of entrepreneurship in Guyana by contributing financial and social capital to help create and  grow local small and medium enterprises (SMEs).

Literature Review

The positive effects of diaspora engagement policies for migration-sending countries has been recognized by many in the development community, including the United Nations, the World Bank, and the US Agency for International Development (USAID) (Agunias & Newland, 2012).  However, diaspora engagement as an academic study is still relatively nascent.  Moreover, most of the extant literature examines how migrants perform in, and contribute to the development of, their countries- of- destination (Riddle & Brinkerhoff, 2011); there is a paucity of literature and especially statistical, empirical studies on the contribution of diasporas to the economic development of their countries- of- ancestry.  Data has not been collected consistently nor have many significant longitudinal studies been undertaken.  Case studies have been the primary research method utilized and while they indicate a positive correlation between diaspora contributions and economic development in countries- of- origin, because the statistical data in many case studies has been gathered after the fact, causality cannot be concluded.

Case Studies: Diasporas contributing financial capital

Accessing financial capital is one of the greatest challenges that SMEs encounter. By providing financial capital through loans, grants and other equity instruments, diasporans could provide needed financing to local SMEs.

In India, the diaspora organization, Indus Entrepreneur (TiE), a networking group of Indian IT entrepreneurs provides venture capital to local start-ups.  This group has had a major impact on India’s economic development by helping the country to grow its IT and business-process outsourcing industries (www.tie.org).

Launched in 2009, the African Diaspora Marketplace (ADM), sponsored by USAID and Western Union, aims to encourage sustainable economic growth and employment by supporting African entrepreneurs through financial capital and other resources (www.diasporamarketplace.org). This year, through its business plan competition, ADM awarded financing to MedEnhanz (a Nigeria based healthcare technology company) to launch WebDoc, a mobile healthcare application that provides real time medical information and offers 24/7 medical advisory services.

In Latin America, Mexico’s 3×1 program and Fundacion Chile are great examples of  how the use of public-private funds have helped finance local entrepreneurs – Mexico’s 3×1 program matches individual migrants’ investment funds with government money to provide financing for business projects, and Fundacion Chile’s public-private fund helps entrepreneurs launch technically innovative agribusinesses in Chile (www.fundacionchile.com).

  Case Studies: Diasporas contributing social capital

While some diasporans and diaspora groups may not have the resources to provide financial assistance, they may still be able to contribute through non-pecuniary means.  Diasporans can circulate knowledge (brain circulation), provide local entrepreneurs with access to pertinent information (e.g. suppliers and other contacts), expose local business to new business practices, technologies and innovations, and provide coaching, mentoring and a support network – factors necessary to the creation of “opportunity type” entrepreneurs.

Ethiopian and Ghanaian diaspora organizations provide apposite examples of how human capital amongst the diaspora can be effectively leveraged (Newland & Tanaka, 2010). Through the use of technology, some of these organizations have set up online discussions and websites to interact with entrepreneurs in their countries-of-origin. In the case of UNIFEM’s Digital Diaspora Initiative, projects are undertaken that empower African women economically through the use of capacity building in the use of information and communication technologies (ICTs).

Chile Global supports the development of innovation and business creation in Chile through the transfer of knowledge, skills, ideas, contacts and technology through members of the diaspora.  Members of its 400 member network of influential Chileans contribute their time, experience, contacts, knowledge, and skills to help Chilean companies.  By 2011, Chile Global had helped 76 companies, holding shares in 23 of them (Newland & Plaza, 2013).

Another case of the successful use of social capital is illustrated in The Lebanese Business Network, an organization established by the Georges N. Frem Foundation and InfoPro, to identify and create links between Lebanese entrepreneurs, expatriates, and international businesses through an on-line marketplace and business matching database.  Its services are free, and involve business referrals, increased access to international markets, and knowledge transfer.  The goal is to introduce Lebanese entrepreneurs to international businesses so as to create strategic alliances, joint ventures, and other partnerships; facilitate international trade; and increase FDI in Lebanon (Ionescu, 2006).

India’s software industry has seen major development due in large part to its Silicon Valley based diaspora of technical managers who played instrumental roles in the development of IT centers in India’s main outsourcing hubs such as Bangalore.  Many of these Indian diasporans return to their homelands at least once a year, many of them more often, facilitating the substantial transfer of information (Kapur, 2002).

In the Philippines, TOKTEN, a program that was started by United Nations volunteers, has helped with business development by facilitating the transfer of knowledge and skills by members of the diaspora to their home country (Newland & Tanaka, 2010).

Diaspora Program
Indus Entrepreneur (TiE). Launched in 1992. Started by a networking group of Indian IT entrepreneurs. Provides venture capital to local start-ups. This group has had a major impact on India’s economic development by helping the country to grow its IT and business-process outsourcing industries.
African Diaspora Marketplace (ADM). Launched in 2009. Sponsored by USAID and Western Union. Encourages sustainable economic growth and employment by supporting African entrepreneurs through financial capital and other resources. This year, through its business plan competition, ADM awarded financing to MedEnhanz (a Nigeria based healthcare technology company) to launch WebDoc, a mobile healthcare application that provides real time medical information and offers 24/7 medical advisory services.
Mexico’s 3×1 program Matches individual migrants’ investment funds with government money to provide financing for business projects.
Fundacion Chile – a public-private fund Helps entrepreneurs launch technically innovative agribusinesses in Chile.

 

Case Study: Relationship building and Establishing Trust with members of the diaspora

Establishing trust between members of the diaspora community and governments in countries- of- origin is essential to any diaspora engagement strategy.  A positive relationship and transparency help to create an environment in which diasporans would be more willing to be involved.

Few governments have taken the task of gaining the trust of the diaspora as seriously as the government of Mexico.  Since the late 1990s, the government has heavily invested in communication and engagement with its diaspora. In 2002, the Ministry of Foreign Affairs established the Institute for Mexicans Abroad (IME) to consolidate and coordinate these efforts through a dense network of over 56 consular offices in North America.  IME works with organized diaspora groups on the 3×1 program, through which three levels of government match the contributions of migrant organizations to infrastructure projects in their communities of origin.  A key trust-building element of Mexico’s diaspora engagement strategy is CCIME, the consultative council which freely criticizes and disagrees with government positions when it feels called upon to do so, which – paradoxically perhaps – consolidates the confidence of both parties that disagreement does not mean alienation (Agunias & Newland, 2012).  Thousands of infrastructure projects have been funded through the 3×1 program.

In addition to the kinds of services provided by the Mexican government, governments can offer privileges to diasporans such as duty-free imports, and repatriation of foreign currency income.  Allowing dual citizenship is one way for governments to signal that it trusts people who have multiple commitments to meet all obligations of full citizenship (Agunias & Newland, 2012).

Discussion & Recommendations

The above examples aptly demonstrate the power that exists in diasporas, and the influence and results that can be achieved from effective diaspora engagement strategies.  These examples can serve as a guide for Guyana.

A diaspora engagement strategy to stimulate entrepreneurship in Guyana should include four elements: a) collecting and segmenting information on the diaspora b) creating profiles of “attractive diasporans” for targeting purposes c) establishing and developing programs to help finance entrepreneurs and SMEs d) creating and developing programs whereby entrepreneurial diasporans can transfer knowledge and provide opportunities for learning and networking.

Mapping and Information Gathering

The first step in a strategy to engage the diaspora is to collect data, and profile and gain an understanding of the diaspora – determine their skills and financial resources; know where they are located, and what level of engagement they are willing to have with their COO.

The Guyana Diaspora Projecthas been an ongoing project by the Ministry of Foreign Affairs with funding provided by the International Organization of Migration, with an aim at amassing data on the Guyanese diaspora.  The initiative was launched a few years ago but seems to have had limited success – on inquiry, information collected through this program was not readily available and it seems that means to communicate the project and consequently collect this crucial data could be more effective.  Known diaspora organizations should be partnered with to help promote the project.  Additionally, not actively publicizing the project during the country’s 50thindependence anniversary jubilee celebrations in May 2016, which saw the greatest number of diasporans returning in decades, was a missed opportunity. Government in collaboration with Guyanese consulates could identify, and even create, events for diaspora internationally, from small town halls to more elaborate events, through which relationships can be built and data collected.

Financial Capital

As previously mentioned, one of the major obstacles for entrepreneurs is access to capital for nascent entrepreneurs to create enterprises as well as for the expansion of existing businesses.  In this regard, the diaspora could play an integral role through the establishment of venture capital and other investment funds. These could be done privately at the diaspora organization level, collectively across organizations, or through a partnership with the government whereby government provides a matching funds mechanism.  The objective of the latter would be to provide income generating loans and/or equity investments in small businesses.  In this way (by receiving loan repayments and/or dividend payments) the fund would be self-sustaining. Other methods include:

  • Crowdfundingis a mechanism through which diasporans could make a financial contribution without having to have very deep pockets. A crowdfunding website could be created (e.g. crowdfundguyana.org) that would provide a list of innovative projects and small businesses that could potentially be funded by the public and members of the diaspora.
  • Business plan competitionsthat are specifically targeted at youth could help develop entrepreneurial skills in this key sector of the population that has one of the highest levels of unemployment in Guyana.
  • Entrepreneurship Funds for youth: Educational scholarship funds and bursaries are the “go to” for most philanthropic diaspora organizations interested in youth development in Guyana. While the value of traditional education cannot be discounted, more focus could be placed on creating youth “entrepreneurship funds” that encourage youth to develop innovations, and create and pursue business ideas. In reality, many secondary school students do not pursue tertiary education because they do not have the requisite educational achievements necessary for entrance into a tertiary institution.  While educational scholarship funds reward the top academic achievers, “entrepreneurship funds” may help those who may not be academically inclined or talented but are nevertheless innovative, have entrepreneurial potential and may be at risk of ending up as a statistic amongst unemployed youth. 

Social Capital

  • Training:Diaspora entrepreneurs, industry specialists as well as diaspora academics could lead seminars, workshops and courses to help local entrepreneurs as well as aspiring youth develop and augment business knowledge. With ICT capability, some of this could be done remotely through webinars and other on-line courses.  In partnership with the University of Guyana, there could be an entire on-line business education program offered and led by diasporans.  Similar to massive open online course (MOOC) institutions, like http://www.udemy.com, courses could be offered at very low costs ($5 US in some cases) so that the initiative could be revenue generating.  In this way, business education could be open to all of the populace from local entrepreneurs needing training on creating a business plan, to youth who could be taught to recognize entrepreneurial opportunities in their environment from a young age.  Since internet access may be an issue for some, the university, NGOs and the private sector could play a role by providing physical spaces available with computers to support this initiative. Diasporans could also lead in person short-term training and educational programs.  Such an initiative could be done in partnership with government and private sector whereby private sector (airlines) could provide free travel, local hotels could provide free accommodations, and the government could provide stipends for instructors.  While many diasporans may be willing to provide this service free of charge, offering a stipend may be more effective and result in a more sustainable initiative.
  • Networking:Networks could be set up around specific subjects, and an on-line database with diaspora member information created. Events could be organized, virtually or in-person, to provide interaction between diasporans and local citizens.
  • Mentoring:Diaspora members with specific expertise could be matched with local entrepreneurs in similar industries and/or businesses.
  • Internships with companies in the country-of-destination:The government in conjunction with consulates (e.g. US and Canadian embassies) could facilitate students participating in summer internships at diaspora businesses overseas.
  • Entrepreneurship Institute at University of Guyana: The establishment of an Entrepreneurship Institute at the University of Guyana could help facilitate knowledge transfer from the diaspora. A key element of this could be providing on-line classes (as was previously mentioned).

Building relationships and trust

            As with any public policy initiative, good governance is key to implementation.  Government needs to provide ease of access for diasporans, clear bureaucratic obstacles (Brinkerhoff, 2009), and spearhead the setting-up of a cross-functional team that would be tasked with the execution of this strategy and be held accountable for outcomes.  Successful implementation of plans requires buy in and ongoing and consistent communication amongst all stakeholders. Local citizens must not feel that “the “Guyanese foreigners” are threats and should be encouraged to understand the value that the diaspora can add.  To this end, government could do more to publicize and reward the accomplishments of diaspora members.  Additionally, government should not treat members of the diaspora as superior to local citizens.  While diasporans may have migrated to advance their individual and family circumstances, there are many local Guyanese who have chosen either not to migrate or who have remigrated to help with the development of the country.  Tax breaks and incentives should not be awarded across the board to the diaspora while not provided to locals who are helping with development of the country.  Rather, these incentives should be offered to entrepreneurs in industries and sectors that are essential to national development regardless of whether they live aboard or not.  In the same vein, diasporans should not behave as if they are superior to local Guyanese and should not dogmatically impose their ideas and beliefs. 

Future Study

Given the lack of scholarship and theories around diaspora engagement and economic development, further empirical research would be beneficial to both scholarship and public policy practice.

Diaspora profiling is one of the crucial first steps to ensuring policy makers efficiently allocate resources for diaspora engagement programs.  As previously stated, there is a dearth of literature and studies that have attempted to profile and discover which members of a diaspora are the most attractive targets.  It is this author’s belief that there exists a direct relationship between the length of time of residence in the host country and the ability and willingness of diasporans to assist with the development of their homelands.  The relationship can be graphed in an inverted parabola, or U shape, with length of time in the country of destination on the horizontal axis and contribution to country-of-origin on the vertical axis.  Newly arrived diasporans (graphed to the left on the horizontal axis) may feel greater kinship, due to nostalgia, with their homelands during the earlier stages of migration and thus may be most wiling to contribute to their homelands.  As the length of stay increases, their ability and willingness may wane as they try to establish themselves in their new homes.  As they become more established, the desire and ability may once again rise.  As the length of period outside their homelands increases and possibly reaches its peak (at the time when diasporans approach retirement when thoughts of returning to their homelands for retirement begin to surface), the willingness to contribute may again reach a peak.  Thus, diasporans located on both ends of parabola may be the most willing to contribute but those on the left may actually not be capable of assisting, since as new arrivals to their host countries, they would be more concerned with establishing themselves.  Diasporans fitting into the right end of the parabola (those with greater tenure in the host country) may be the most attractive targets since they would be both more willing and have the means to contribute to their homelands.  However, to reiterate, this explanation is just this author’s hypothesis and has not yet been tested.

Other questions which warrant exploration to add to diaspora engagement theory include:

  • Is financial capital contribution more important than social capital?
  • Which members of the diaspora are more likely to contribute financial versus social capital?
  • Are diasporans more likely to contribute individually or collectively as members of organizations?

Theory around these questions would greatly add to diaspora engagement scholarship and guide policy making decisions.

Conclusion

Despite the lack of empirical study and data regarding the role of diaspora engagement in economic development, many cases globally support the position that diasporas can be an asset to their counties- of- origin through their contributions of both financial and social capital to local entrepreneurs.  While governments have historically used terms like brain drain in describing loss of intellectual capital, many cases globally illustrate that policy makers should develop programs to instead capitalize on the phenomenon of brain circulation.

To be effective, diaspora engagement strategies require cooperation between government, the private sector and civic society. Working cooperatively, and in tandem, these groups can create programs, and an environment, to facilitate economic development through the establishment of a robust entrepreneurial sector.

References

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