A World Bank study finds that West African diaspora communities, particularly in Europe, help attract foreign investment through financial re The research urges ECOWAS governments to improve governance, mobilise diaspora savings and diversify investment beyond natural re
A new World Bank research paper, prepared by researchers from the World Bank Group, the Laboratory of Economics Applied to Development (LEAD) at the University of Toulon in France, and affiliated institutions including the Complex Systems Institute in Lyon and OFCE-Sciences Po, has revealed how African diaspora communities influence foreign direct investment (FDI) in West Africa. Authored by Kouakou Constant Ouattara, Cécile Bastidon and Nadège Désirée Yameogo, the study examines 14 countries in the Economic Community of West African States (ECOWAS) between 2005 and 2020. It finds that migrants living abroad can help attract international investment through professional networks, financial resources and business connections, but their influence depends heavily on political stability, institutional quality and government policies.
The research challenges the traditional view that migration mainly deprives developing countries of skilled workers. Although emigration can reduce domestic talent, migrants also create economic opportunities by connecting their home countries with international markets. Their contributions extend beyond remittances, which support household consumption, education and healthcare. Diaspora communities can promote exports, facilitate business partnerships, transfer knowledge and encourage foreign companies to establish operations in their countries of origin.
Europe-Based Migrants Emerge as Key Drivers of Foreign Investment
One of the study’s most significant findings is that the location of diaspora communities strongly influences their ability to attract foreign investment. West African migrants living in Europe demonstrate the strongest and most consistent positive relationship with FDI inflows. Their connections with international companies, financial institutions and professional networks help investors identify opportunities and understand local business conditions.
Diaspora communities in Asia also contribute positively, although their influence is smaller and more closely associated with natural re show a weaker relationship with investment inflows, while migration to Northern and Southern Africa has no statistically significant effect in the study’s principal analysis
Researchers suggest that differences in income, professional opportunities, education and international business relationships may explain these patterns. Migrants living in wealthier economies generally have greater access to financial reent decisions more effectively
Diaspora Savings Offer Billions in Untapped Investment Potential
The study identifies substantial financial potential in the savings accumulated by West African migrants. Researchers estimate that ECOWAS diaspora savings increased from $16.6 billion in 2005 to $28.8 billion in 2020, representing growth of approximately 73.49%.
These remies struggling with high borrowing costs and limited access to international capital markets. The findings establish a positive statistical relationship between estimated diaspora savings and foreign investment, highlighting opportunities to mobilise overseas wealth for domestic business development
Cabo Verde provides an example of how governments can encourage diaspora participation. With an estimated overseas population of one million compared with approximately 500,000 domestic residents, the country has introduced specialised banking arrangements and investment incentives.
Diaspora deposits have supported banking liquidity and business financing, while new legislation has established clearer investment rights and administrative procedures. The experience demonstrates how overseas savings can contribute to economic development beyond conventional remittances.
Political Stability and Strong Institutions Shape Investor Confidence
The research emphasises that financial rement. Strong institutions are essential for attracting foreign businesses and encouraging migrants to invest in their home countries
Anti-corruption measures, political stability, civil liberties and political rights are positively associated with FDI inflows. The study also finds that political stability strengthens the positive relationship between diaspora networks and investment, making institutional reform an important part of economic development.
Historical legal systems also appear to influence investment patterns. Former British colonies generally demonstrate stronger FDI performance than former French colonies, while findings for former Portuguese colonies are less consistent. Researchers associate these differences partly with stronger property rights protection under common-law systems and the international commercial advantages of English.
The findings suggest that governments must improve transparency, protect investors, simplify administrative procedures and strengthen confidence in public institutions to attract sustainable international capital.
Beyond Natural Re
Another major concern highlighted by the study is the concentration of foreign investment in natural reand trade openness encourage investment, while GDP per capita generally shows a negative relationship with FDI in the principal estimates
They interpret these patterns as evidence that investment remains heavily directed towards commodities rather than diversified industries capable of supporting wider economic transformation.
For traders and domestic businesses, stronger diaspora connections could create opportunities to reach international markets, attract financing and establish partnerships with foreign companies. Consumers could benefit indirectly through increased employment, improved services and stronger domestic production, although these outcomes are not directly measured by the study.
For policymakers, the findings underline the importance of encouraging investment in manufacturing, agriculture, processing and services. Digital investment platforms, diaspora financing instruments, stronger governance and better investor protection could help mobilise overseas capital.
Ultimately, the research concludes that diaspora communities represent an important but underused economic reupport long-term development, provided governments strengthen institutions and direct capital towards productive industries that create quality jobs and expand economic opportunities
- FIRST PUBLISHED IN:
- Devdiscourse
