According to the World Bank, remittances to sub-Saharan Africa grew to $37.8 billion in 2017. These are forecast to hit around $39.2 billion this year and $39.6 billion in 2019. When this money remitted, it is for different purposes. From supporting parents and relatives to personal investments.
Against this backdrop, a group of diasporas are launching a fund. RemitFund - a non-profit - is set to capitalize on remittances by Africans in the diaspora. The fund is looking to transform remittances into social impact.
"RemitFund aims to leverage these financial flows for greater social impact on the continent," says Grace Camara. RemitFund's the Founder and Executive Director of Remitfund.
According to her, they will do it "by enabling Africans in the diaspora to donate a percentage of their remittances to an investment fund."
Remittances to Africa play a crucial role in developing the continent. “They provide a huge safety net for many families,” Grace said. If not used for taking care of relatives, remitted funds also act as capital for starting SMEs across the continent.
Yet, Grace thinks that they can do more. Especially providing a solution to unemployment.
“Remittances in their current form will not provide enough investment to curb the 'brain drain' of skilled Africans who struggle to find employment and so look for opportunities abroad”.
As per this AfDB report, Africa’s youth population is growing and expected to double to over 830 million by 2050. It also estimates that of Africa’s nearly 420 million youth aged 15-35, one-third is unemployed. Another third is vulnerably employed, and only one in six is in wage employment.
This implies that while 10 to 12 million youth enter the workforce each year. Yet, only 3.1 million jobs are created. Leaving a vast number of the youths unemployed.
By setting up the RemitFund, the diasporas are looking to tackle the unemployment issue head-on. “[It] is causing many young people to risk their lives in search of economic opportunities in Europe and beyond,” Grace said. Hence the move to only consider high growth potential startups for investment.
Although they are sector agnostic, the fund's focus will be “social impact businesses". Especially those "led by Africans in the diaspora and on the continent”. The fund started in June 2018 and will not make any investments until next year. RemitFund's will structure the deals in form of debt, equity or both.
“Investees will receive initial funding from RemitFund and will have the opportunity to match fund through our online investment platform. We are currently working on developing a pipeline of potential investees who are ready to receive investments from the fund and our partners".
In the meantime, they are running business support programmes. These include Facebook Live sessions and masterclasses for aspiring entrepreneurs.
Beyond the fund, the same group will also be looking to launch two more products next year. This includes a crowdfunding platform. Grace says that it “will facilitate a mix of crowdfunding and crowd-investing”.
“There are so many diaspora-led businesses doing amazing and innovative work on the continent with very little funding. The platform will help these businesses to scale and provide even greater social impact.”
While the second will be “a fellowship scheme for African start-ups”. This will run “in partnership with innovation hubs on the continent and the world's top professional services firms.”