How Diaspora Capital Can Drive Growth In Africa And The Caribbean

Forbes

5 days ago

In 2023, diaspora communities in Sub-Saharan Africa and the Caribbean remitted an estimated $54 billion and $18.2 billion, respectively. However, more and more investors from Kingston, Lagos, and other places want to do more than just transfer funds back home.
These investors, aware of the difficulties in their home countries, aim to mobilize capital for affordable housing, expand financial access, and generally, contribute to the creation of scalable, domestically developed solutions to boost these countries' economies.
A 2024 study reviewing existing research on diaspora direct investments, identifies diaspora capital as becoming an increasingly relevant source of development finance: 'Amid global economic slowdown and in a post-Covid-19 world, focusing on diaspora direct investment can be a new source of investment, particularly for countries that have substantial numbers of migrants and diaspora around the world.'
In an interview, David Mullings, founder and CEO of Blue Mahoe Capital, shared how this insight reflects lived reality. He has spent years working with diaspora communities looking to invest in their home countries.
'We all want to invest back home, but we don't have easy ways to do it,' explains David Mullings, 'Nobody has really spoken to the diaspora to say, 'Hey, here's a way to deploy capital back home in a way that is sustainable, that builds these countries, so that others don't need to leave.''
Why the Diaspora Matters
Historically, discussions about investing in Africa and the Caribbean center on international aid and foreign investments. The diaspora's economic potential remains largely untapped, yet if utilized, it can have a significant impact.
Take financial access for example. Being able to transact easily is the hallmark of any thriving economy. As Mullings states, 'if payments don't work, nothing works. Fintech underpins the entire innovation ecosystem.'
Mullings has worked with diaspora investors to support funding for Seed Jamaica, a fintech platform offering micro-lending for personal loans, launched last year. So far, the fintech company is already changing lives, and 'people are able to apply and get money in 48 hours without having to physically go into a branch and sign over their life,' he shares.
Blue Mahoe Capital also supports affordable housing in Jamaica by building one-bedroom homes funded by diaspora capital. 'It's the first time the diaspora has pooled money to go and build houses for locals to buy,' says Mullings. 'These houses do not go towards Airbnb, but are homes for teachers, nurses, and public sector workers.'
In Africa, Borderless is connecting diaspora communities with investment opportunities in real estate and startups, and has since its launch in 2024, processed about $500,000 in transactions.
Why Diaspora Capital is Different
Founders in Africa and the Caribbean often overlook diaspora investments, instead focusing on Silicon Valley funding.
Mullings, however, points out that founders who do so are missing out because, unlike venture capital, diaspora finance offers a seat at the table. 'Typically, solutions that have been brought to African, Caribbean and Pacific countries have been designed by our former colonial masters. That automatically has issues,' he says. 'So, we need stuff essentially for us, by us, designed with us, our culture in mind.'
To illustrate the points, he recalls the example of General Electric, where the company's U.S.-designed, expensive medical equipment was unaffordable in China until local engineers redesigned it to fit the market. This case study highlights the value of using local knowledge to design for local markets.
Mullings, therefore, encourages entrepreneurs to explore diaspora capital as a way to scale home-grown solutions that cater to the needs of local communities.
The Roadblocks
Harnessing diaspora financing, however, is not without its challenges. Many left their homes in search of better opportunities due to systemic dysfunction and still carry a sense of distrust. Mullings explains that there is a 'trust deficit' fueled in part by negative stories circulating on social media.
Yet, emotional ties endure. As the 2024 study puts it, 'Members of the diaspora may not be directly involved in economic and social challenges of the origin country, but they are often concerned about it and may contribute to pursuing solutions.'
Convincing them that their capital investments in local enterprises are safe and secure, requires some education. 'So, we've had to bring people up to speed on the positive stories from these various countries in the region,' says Mullings.
And the trust challenge goes both ways. Local people—whether founders, potential board members, or service providers often see diaspora investors as 'foreign-minded.' 'So, we are seen as troublemakers sometimes,' Mullings admits. 'But it's good trouble. We need that good trouble if we're going to be globally competitive.'
To navigate this, diaspora investors often have to collaborate with local champions so as not to be seen as out of touch.
The second challenge is financial literacy. It can be difficult for retail investors to understand how investments work, particularly the risks associated with capital loss and the reality that returns aren't guaranteed.
In the Caribbean, a particular challenge has been the difficulty in doing business, particularly when opening bank accounts and setting up entities to pay local workers, instead of wiring money from the U.S. to Jamaica.
Mullings says, 'Payments underpin everything. If I can't easily open a bank account to transact business, pay staff, pay for services, or collect revenue, I'm going to have a problem, regardless of what industry I'm in. And the single biggest problem we have in these countries is banking.'
The Diaspora Financing Playbook
Often, Caribbean and African communities look for inspiration and funding from the Global North, but there can be value in South-South cooperation, with the Caribbean learning from Africa's successes and failures and vice versa.
'We tend to focus too much on North America and what's happening there. Oh, I want to launch the Uber of Jamaica versus how about the M-Pesa of the Caribbean? Why not actually partner with them and bring it over? We essentially have been taught by the media to look down on Africa,' Mullings observes.
A cultural shift is also needed in Africa and the Caribbean to normalize failure, which is often perceived as taboo. In contrast, in Silicon Valley, it's a rite of passage, as investors are more interested in backing entrepreneurs who have failed and learned from that experience than those who haven't failed at all.
If we are to innovate, 'we have to change failure from being a badge of shame to a badge of honor,' he says.
For local enterprises seeking to attract diaspora capital, Mullings recommends understanding your 'why,' perfecting your pitch, and engaging with diaspora investors on their preferred platforms, Facebook, LinkedIn, Instagram, and TikTok, to identify potential investors in your region. He says: 'You need to be able to communicate the problem you're solving, what your solution is, and why you care so much about that problem.'
He also suggests tailoring the offer by understanding what diaspora investors are looking for and what it would take to write a cheque to support local businesses back home, recognizing any past challenges they may have encountered and explaining why their offer is different.
'They focus so much on Silicon Valley and how to pitch a VC, or how to get into Y Combinator. But that's not who you're talking to. So, tailor the pitch,' Mullings adds.
In all, diaspora communities have much to offer beyond remittances. Diaspora capital is a symbol of resilience and resolve. It's a means for those abroad to invest in shaping the country of their dreams.