Diaspora Direct Investment Inflow into Democratic Republic of Congo v2

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Diaspora Direct Investment Inflow into Democratic Republic of Congo
By Christian Kingombe, 8th of February 2017.
Background
In the spring (March) of 2012 I had the great opportunity to be part of a team that organized the second edition of the Congolese Economic Forum in the European Union (FECUE-II), which was held in Brussels in collaboration with the Embassy of Democratic Republic of Congo (DRC) and funded by The ACP Business Climate Facility (BizClim).
Continuing its role as a platform for dialogue and exchange of ideas to promote productive investments in the DRC, the objective of the FECUE-II was to discuss the obstacles and hurdles to increasing the volume of remittances through formal channels from the EU into DRC as well as how to utilize a Mobile Bankingplatform to attract, channel and augment the amount of remittances from the Congolese diaspora (i.e. diaspora direct investments) towards private sector social and economic investment projects (today known as SDG projects) beyond the current low level in the country of origin, especially when it comes to venture capital for start-ups.
The inspiration to the FECUE event e.g. came from the experience by the telecommunications (telecom) company Zain, which previously had launched Mobile Banking in many African countries, including Kenya, Tanzania, Uganda, Sierra Leone, Zambia, and Madagascar. Barely two years after creating the first cross-border mobile network, Zain launched a money transfer service that allows its customers to send and receive money through the cross-border network. The transfer of money by mobile phone allows those who cannot go to a counter or a distributor to use financial services, thus compensating for the tendency of the banking system to favour people who have a higher education and an ordinary deposit current account.
The FECUE-II project started on the basis of new legal and regulatory framework on electronic money (e-money): Directive #24 which was a landmark development in the Banque Centrale du Congo's (BCC) financial inclusion strategy that aims to favour the emergence of mobile banking services and for fostering diaspora-led investments in the DRC. The idea is how the additional resources generated from lower transaction costs associated with innovative ways of sending money back home could be utilized in a more productive and sustainable manner in the recipient country of origin. I believe this is a policy relevant question, especially given the fact that since 1996 the value of remittances towards the low-income countries has been higher than the total value of ODA and subsequently even higher than foreign portfolio investments (Maloumby & Kingombe, 2015, 2016).
The FECUE-II consisted of panel discussion through four Plenary Round Tables, which allowed participants to focus on the following topics:
Plenary session I: Business climate and Mobile Banking in the DRC: State of play and regulatory framework;
Plenary Session II: Mobile Banking Funds Transfer;
Plenary Session III: The Benefits of Mobile Banking for the Diaspora and the Implementation of Mobile Banking;
Plenary Session IV: What future for Mobile Banking in the DRC?
These discussions will not be summarized here, but are instead captured in our FECUE-II report 2012.
On the other hand, the key question, which this article will attempt to address is: 'What has happened to Diaspora Investment and Mobile Banking in DRC during the five years that have passed since the completion of FECUE-II in March 2012?' The process that was launched in Brussels by the Government of the DRC in the presence of all the leading stakeholders from relevant Government Agencies to representatives from the Congolese and Belgium Business circles; the Congolese and international financial sector, including a number of international banks; the telecommunication sector as well as potential investors from the Congolese diaspora and beyond.
My personal contribution
To lend support this process, I firstly chose to write a blog entitled "Mobile banking for catalysing diaspora investment: a leapfrogging development opportunity for the ACP and DRC. I gained additional knowledge about the subject matter through my work at the African Development Bank, where we e.g. commissioned a relevant "Study on Remittances in the ECOWAS Region," written by NET PRESENT VALUE LIMITED in 2014. I subsequently in 2015 co-authored a paper, building on insights from FECUE-II, entitled New Technology & the Quest to lower High Cost of Remittances to Africa published by Centre for Finance & Development (CFD) at the Graduate Institute Geneva (IHEID) in October 2015 and updated in March 2016. I also had the opportunity to make a series of presentations addressing these issues at the Graduate Institute Geneva CFD Brown Bag Series; UNCTAD's Inter-Departmental Brown Bag series; at an Africa21 seminar entitled: la diaspora africaine en Suisse: quelles dynamiques? Quel rôle pour le Programme de développement 2030 de l'ONU? Some of these presentations were part of a technical assistance (TA) project preparation on Diaspora Investment, which I in vain sought to persuade successively UNCTAD and ITC to host. Fortunately, the IHEID/CFD offered to host me as a Senior Research Fellow to allow me to further develop and design the project in close collaboration with EPFL, University of Milano, the Open University of Tanzania while associating a number of international organizations instead of asking them to host the TA project. So, in other words, the Technical Assistance programme has been transformed into an Action-oriented Pluri-disciplinary 2 year research project entitled "Diaspora Impact Investing for Sustainable Development", subject to receiving a Research Grant from SNIS. This account more or less summarizes, what I have been doing on the "diaspora" front in the last 5 years to support the implementation of the recommendations coming out of the FECUE-II.
Congolese Diaspora
When it comes to the potential for diaspora savings in African countries in 2009 according to Ratha and Mohapatra(2011) the DRC emigrant stock in African countries were around 0.9 Million. The number of Congolese migrants in the European Union is still rapidly increasing (a Belgian study estimates that some 400,000 First and Second (DRC still doesn't allow dual citizenship) Generation Congolese immigrants reside in Belgium in 2010). Moreover, in 2013, diaspora economic remittances to the DRC amounted to US$7 billion — which was only about 1 billion less than the Government' Budget for 2014. Nevertheless, prior to the FECUE-II this sizeable Congolese diaspora in and outside Africa were not involved in setting up businesses in the DRC, and the share of their private savings sent to the DRC was mainly devoted to private consumption and was often channeled through expensive means of money transfers and / or unsafe informal money transfer channels.
A few Socio-Economic & Impact Investing Projects by the Congolese Diaspora
In 2012 a diaspora co-development project was started and organized by Congolese Genocide Awareness, Inc. (CGA) entitled "Women's microfinance initiative Mwanzo Upya (A New Beginning)", which is located in the eastern part of the DRC. The project was started after the war in eastern Congo to provide help to women and children who had suffered in war atrocities. The microfinance project helps the victims of war to re-gain their economic independence and find their place in the post-conflict society. The project started in 2012 and is offering women micro-loans to grow their small businesses and support their families. The project is based on a peer solidarity model, where loans are issued to individuals in small groups and subsequent loans depend on repayment by all. The project started with 15 members and today manages about 300 women, directly impacting over 5,000 family members of the genocide survivors. Project members are reporting significant increases in children's school attendance, household spending on food, as well as growth in women's savings and income. It engages people with different skill sets from the diaspora community for assistance with different aspects of the project — including teachers, business people, community facilitators, and microfinance experts. It also facilitates cooperation of the project with local Congolese government and other organizations.
Diaspora groups from the DRC are also actively involved in rural and community development in their country of origin. For example, African Conservation and Development Foundation (ACDEF) was created by a group of experienced Africans and international professionals in the area of sustainable development and environmental conservation in Africa. ACDEF is a platform for biologists, economists, development experts, environmental lawyers, conservation and development activists bonded by the general drive to overcome the daunting challenges facing Africa in reaching the UN SDGs. The Nature and People Programme has three components, including a third concentrates on social and economic development.
Mobile Banking in DRC since 2012: A tale of Progress
Notwithstanding these few positive diaspora interventions in DRC, last year despite the fact that more than 35 million Congolese use mobile telephony, the DRC still has a very low rate of banking (6% equivalent to 13 million accounts opened in banks from only 3 Mn accounts in 2010), leaving more than 40 million adults outside the banking system. The positive news is that as a consequence of the 2012 legislation a handful of banks, in partnership with telecom companies, now practice Mobile banking. Since May 2015, Airtel Congo (more than 7 million subscribers) has been experimenting with "Libiki", a micro credit supply without the usual guarantees, in collaboration with the commercial bank UBA. Since July 2015, the Trust Merchant Bank S.A. (TMB) has launched a unique mobile banking solution, "Pepele Mobile", which is operational on all telephones and telecom operators. Vodacom Congo is developing "Advance on wages", previously intended for civil servants, in partnership with Sofibanque since October 2015. The commercial bank Finca RDC, specializing in microfinance, last year planned to launch a mobile banking platform by the end of 2016. Other banks like Ecobank-RDC also do Mobile Banking. However, the big part in the use of financial services via the phone is still the Mobile money as in 2012.
All the five cellular operators in the DRC are already offering Mobile Money, mobile payment (transfer of money, savings, recharging of credits, payment of invoices, etc.), without the telephone number of the Subscriber being connected to a bank account. Amongst these telecom companies in the DRC, as announced at our FECUE-II meeting in Brussels in March 2012, Airtel Congo (more than 7 million subscribers) was the first to launch its "Airtel-money" on 20 March 2012. Tigo (6.6 million cellular subscribers), which also attended the FECUE-II, also launched a Mobile money service with its Tigo-Cash launched in July 20, 2012. The leader in cellular telephony in the DRC, Vodacom (with more than 11 million subscribers), followed in November of the same year with its "M-Pesa". In 2015, Orange RD Congo (with 5.2 million subscribers) dropped its "Orange Money". Since the end of March 2016, the 6th mobile phone operator in DRC (started operations in July 2012) Africell launched "Afrimobile Money" in Kinshasa with the aim of covering all 26 provinces of the DRC. At that occasion the director of operations of the Central Bank of Congo (BCC) said that with the introduction of mobile banking, the volume of transactions in the DRC had increased from 6 million in 2014 to 54 million in 2015. According to statistics from the BCC, mobile money has responded to the difficulties faced by the population in accessing basic financial services. It is for this reason, as BCC declared at the FECUE-II, that it was adopted by the monetary authority, although it should be stressed that there are still only 2 million active users of financial services from the telephone in the DRC out of a total of 35 million cell phone subscribers! Hence, the opportunities in the sector remain intact, especially for the diaspora thinking about using this Fintech innovation for productive investments in DRC. The diaspora need to have in mind that the use of the mobile telephones is becoming more widespread across the whole country. Cell companies, by their agencies and the network of credit card dealers, are by far better established in the country than the banks' agencies.
Obstacles to Diaspora-led Direct Investment in DRC
Notwithstanding all this progress since FECUE-II, the major stumbling block for the Congolese diaspora is the lack of adoption of a Kenyan M-PESA Money Transfer model, which in Kenya includes the possibility of sending money via Western Union to 45 countries around the world. This is not yet the case in the DRC!
Lessons Learned from the Kenyan Mobile Banking and Diaspora Investment Experience
The DRC, with only US$56Mn of annual financial flows through mobile payments, according to the BCC, can draw inspiration from the Kenyan example and realize a substantial increase in subscribers to payment via mobile phone as discussed and agreed during the FECUE-II already in 2012.
In Kenya, public sector interest in the diaspora did not openly materialise until 2004, when discussions on the subject began at different public agencies. Since then, the government started work on establishing the administrative, legal and regulatory framework geared to improving its capacity to attract further diaspora funding and channelling it into private sector investments.
In March 2007, the Kenyan government established the International Jobs and Diaspora Office (IJDO) domiciled at the Ministry of Foreign Affairs and linked to the Cabinet Office in the Office of the President. The diaspora section of the office engages with the diaspora seeking, amongst others, to:
Facilitate the increase in remittances from the diaspora by working with the relevant Government organs to formulate and implement cheaper and faster methods of remitting funds home.
Engage with the Diaspora and enlighten them on investment opportunities available in Kenya.
Facilitate the development of a consular service that addresses the needs of Kenyans in the Diaspora.
Research and develop products and a policy framework that increases and directs remittances towards more "developmental" uses.
This eventually led to the establishment of an interagency-committee-the Diaspora Technical Team. It aimed at the mainstreaming of the diaspora, by highlighting the key role it could play in the country's economic development. It also had the mandate to provide suggestions on laws, regulations and policies to create a conducive environment for facilitating diaspora involvement in relevant domestic political, economic and social issues.
Conclusion and Policy Recommendations
In view of the Kenyan experience and the existing obstacles and hurdles to diaspora-led investments, the DRC already fulfills two out of three necessary factors. What remains is only for the State, through the BCC, to invest more in the granting of facilities to telecom companies in order to popularize Mobile banking. This will make it possible to increase the bankarization rate on the one hand, and to bring back to the formal circuit the money supply circulating in the informal, on the other hand.
Moreover, mobile payment helps microfinance institutions (MFIs) and cooperatives to streamline their operations due to low transaction costs. Thus, these decentralized financial institutions can offer more competitive borrowing rates to their users, who are often poor and low-income households. As one of the lowest ranked LDCs in terms of income per capita and Human Development Index (HDI) DRC requires financing (including from the diaspora) to stimulate domestic production activity, maintain growth and boost the improvement of the living conditions of its rapidly increasing population. It's important that the new coalition Government that we have been waiting for since the miraculous "Saint-Sylvestre" agreement brokered by The National Episcopal Conference of Congo (CENCO) between the Incumbent and the Rally of the opposition, fully understands that it is of the utmost urgency that it, through the BCC in particular, immediately invest to ensure that banking services play a predominant role as "providers and collectors in the short and long term of essential productive resources" for entrepreneurship and SME growth in DRC.
And finally, that the coalition quickly adopt some widely accepted legal and regulatory best practices considered as enablers to diaspora-led investments, such as (i) Dual citizenship; (ii) tax incentives for diaspora investors; (iii) streamline the number of agencies participating in diaspora investment promotion activities via a proper Inter-Ministerial Diaspora Investment Policy Coordination Mechanism with the regular participation of diaspora networks and the domestic private sector; (iv) A more aggressive engagement with the non-political Congolese Diaspora networks outside of the African continent e.g. by reacting diligently to their initiatives such as the CCSC in Switzerland; (v) Ensuring that the Diaspora can become a catalyst / tool of promotion and indispensable support to the success of the implementation of the Mobile Banking platform in the DRC e.g. by allowing the smooth shift from domestic money transfers to international money transfers. This would in turn enable that the private savings of the Congolese diaspora could be transferred more quickly to (SDG) projects in the DRC such as local infrastructure (including utilities), health, education etc., with expected additional social benefits and an increase in the returns on these impact investments (i.e. the triple bottom line).
8th February, 2017
Geneva.



The FECUE derives from the mandate of the Ministers of the African, Caribbean and Pacific Group of States (ACP) in charge of Asylum, Migration and Mobility at the meeting held in Brussels on the 13 April 2006. Under Section III on "Migration and the role of the Diaspora in the Development ", the meeting called for the creation of private initiatives to contribute to the social and economic development programs of the ACP States and Regions.
Bizclim provides technical assistance aimed at improving regulations, legislation, the institutional set-up and financial measures (the rule of the game) related to the enabling environment of the private sector in ACP Countries or regions. See also, BizClim. 2009. Study to Explore Mechanisms to Facilitate the Contribution of the African Diaspora to the Domestic Economies. EUROPEAID/119860/C/SV – Request N° 2007/146556. LOT 10.
Mobile banking is nothing other than the use of financial services via mobile telephony.
In other words, BCC designed an enabling regulatory framework that allows non-bank e-money issuers to offer transformational financial services. Source: http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2014/04/Enabling-Mobile-Money-Policies-in-the-Democratic-Republic-Of-Congo.pdf
A By signing the legal framework of Mobile Banking on November 11, 2011, the Governor of the Congolese Central Bank (BCC) committed the final preparatory step towards guaranteeing the success of mobile banking that was launched in March 2012 coinciding with our FECUE II event.
See ODI Blog Posts, 24 May 2012.
2016: Presentation of "The Quest to Lower High Remittance Costs to Africa: A Brief Review of the Use of Mobile Banking and Bitcoins" Brown Bag series, CFD – IHEID MAISON DE LA PAIX, Geneva, 10 March 2016.
Presentation of "From Billions to Trillions to Action: How to finance the SDGs - The Role of the Diaspora Finance," UNCTAD, Geneva, 16 Feb. 2016.
Presentation of 'Mettre à profit les envois de fonds et les compétences des diasporas pour renforcer les capacités productives', Africa21 Conférence: la diaspora africaine en Suisse: quelles dynamiques? Quel rôle pour le Programme de développement 2030 de l'ONU?, Jeudi 17 décembre, à l'OMM, Geneva. 2015.
The potential savings of this Congolese migrant stock was US$1.1 billion (Ratha and Mohapatra, 2011).
For example, on the first of January 2006, there were 40.301 people who were Congolese by birth in Belgium. 77,5% (31.253) of them were born in the DRC and immigrated to Belgium, only 22,5% (9.048) of them were born in Belgium. Of those 40.301 who were Congolese by birth, 64,5% (25.987) had the Belgian nationality on the first of January 2006. By the first of January 2008, the number of Congolese born who took on the Belgian nationality had practically reached 30.000. Moreover, between 2003 and 2007, 9.628 people from the DRC took the Belgian nationality. The statistics shown above do not take into account mixed couples, where one of the parents is Belgian. Those children receive automatically the Belgian nationality and are therefore not included in the numbers. Source: http://www.diaspora-centre.org/DOCS/EADPD/24022014EADPD-Report-def.pdf
Among the top 12 major nationalities in Belgium on 1/1/2015 the Congolese ranked 12th (2% (~225,000) out of Belgium's total population of 11.267.910 habitants from only 1.3% (11,337) in 31/12/2000. Sources: http://www.vivreenbelgique.be/11-vivre-ensemble/la-belgique-en-quelques-chiffres and http://www.belspo.be/belspo/organisation/publ/pub_ostc/agora/ragee058_fr.pdf
For example in 2009 the MTO participation in remittances in DRC was: Western Union (45%); Moneygram (3%); Coinstar (29%); Transhorn Money Transfer (23%). And in-bound payment of remittances by institution: Bank(25%); Forex (0%); MFI (0%) despite being allowed to carry out international money transfers; Other (67%); Post (4%); and Retail (9%). See also, http://www.iomdakar.org/profiles/content/migration-profiles-democratic-republic-congo
This is a U.S.-based non-profit organization dedicated to working to enhance the quality of life for Congolese Genocide survivors. It is also an important fund-raising actor among the Congolese diaspora community.
Source: https://www.bu.edu/bucflp/files/2015/12/CFLP_001_111215low.pdf
Source: http://www.diaspora-centre.org/DOCS/EADPD/24022014EADPD-Report-def.pdf
Can't find it on their website http://www.finca.cd/en/what-we-offer/value-added-services/ accessed 8th Feb. 2017?
Source: http://www.financialafrik.com/2016/07/08/rdc-linclusion-financiere-par-le-mobile-banking/#.WJru7oWcG3A accessed 8th of February 2017.
The telecom is part of the four companies (the three others Airtel, Oasis and Vodacom) that had purchased 3G licenses each for $ 15 million. Source: http://www.agenceecofin.com/operateurs/2307-5906-rd-congo-africell-rdc-devient-le-sixieme-operateur-de-telephonie-mobile
Source: http://www.radiookapi.net/2016/03/24/actualite/economie/lancement-de-lafrimobile-money-kinshasa
More than 20 million mobile payment users for more than one billion US dollars of financial flow each month. Source: http://www.financialafrik.com/2016/07/08/rdc-linclusion-financiere-par-le-mobile-banking/#.WJru7oWcG3A
Source: http://www.bizclim.org/en/images/structure/publication/issues_specific/Diaspora_Report_en.pdf
(1) The diaspora-focused agency is short staffed and under-funded; (2) The legal and regulatory framework remains weak, including measures related to (a) dual citizenship and (b) Absence of tax incentives for diaspora investors; (3) Engagement with the diaspora remains weak.
(1) The boom of mobile telephony in the country; (2) Simplicity, accessibility and low transaction costs; And (3) the action of the Kenya Central Bank for the validation of the service.
Source: http://www.africa-newsroom.com/press/didier-reynders-recalls-importance-of-the-new-year-agreement-in-the-drc?lang=fr

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