1. Somaliland Investment Forum
Hargeisa, Somaliland - September 19-21, 2016

3. Security and Governance have dramatically improved
Active transition from aid dependence to market driven economy
Legislation either passed or making their way through parliament
Foreign Investment Law
Islamic Banking Law
Central Banking Law
Electrical Energy Act
Commercial Banking Act
Businesses are shifting from traditional to formal operations, gaining sophistication, preparing for stronger due diligence and FDI

4. Threats to Progress - Role of Remittances
Youth unemployment (age 14 – 29) = 67%
Private sector investment for job creation is critical, however capital access is constrained, needs improved regulatory framework leaving costly and poor access to credit.
Remittances = 25–45% of GDP. Beyond funding consumption, remittances provide capital to invest in micro and small enterprise
International Financial Institution ‘derisking’ actions threaten remittance flows to Somalia
Globally, diaspora are patriotic investors back home post-conflict and are patient, understanding, and ready to invest
Somalis are no exception, however they will benefit from better systems and investment vehicles (est. 2 million Somali Diaspora worldwide)

5. Global Role of Remittances
Youth unemployment (age 14 – 29) = 67%
Private sector investment for job creation is critical, however capital access is constrained by immature and poorly regulated financial services sector and poor access to credit.
Remittances = 25–45% of GDP. Beyond funding consumption, remittances provide capital to invest in micro and small enterprise
Globally, diaspora are patriotic investors back home post-conflict and are patient, understanding, and ready to invest
Somalis are no exception, however they will benefit from better systems and investment vehicles (est. 2 million Somali Diaspora worldwide)
International Financial Institution ‘derisking’ actions threaten remittance flows to Somalia

6. Remittances reality cycle – Opportunity for Development

7. Remittances and Development
Remittances and Development in Rural Areas: Strategic opportunities for IFAD
Remittances and Development
IFAD and Remittances: Pillars and areas of Focus
Financial Inclusion
(1 and 2)
Diaspora engagement
(3)
2 -“Use”
Promote financial options
Distribution channels
Financial literacy
Cross-selling of financial products
Savings mobilization
1 -“Access”
Strengthen an inclusive rural remittance market
- Competition promotion
- Intermediation (MFIs, Postal)
- Innovative models
(Mobile, virtual)
- Regulatory framework
Maximizing the
positive impact
of remittances
and migration 2
3 -“Investment and
entrepreneurship
back home” 1
Promote investment of remittances and migrant
savings
Opportunity identification
Productive investment models (Funds, Bonds)
Skill development
Entrepreneurship 3 7

8. International Day of Family Remittances
Promote the development impact of remittances worldwide:
Public-private partnerships to create a more favorable regulatory and market environment for remittance flows, reaching the “last mile”, or rural communities through financial access and inclusion
Private-sector initiatives to contribute to increased competition, lower transactional costs and provide innovative financial products to meet the needs of low income families
Civil society collaboration to identify a broader range of economic opportunities and share knowledge resulting in more options to improve the living standards of remittance families

9. Innovative Finance Targeting Diaspora
Somali AgriFood
Fund
Innovative Finance Targeting Diaspora

10. Seed Match to Diaspora, Local and External Investment
Somali AgriFood
Fund
Seed Match to Diaspora, Local and External Investment

11. The Reach to Global Somali Diaspora
Somali AgriFood
Fund
The Reach to Global Somali Diaspora

12. The Impact

13. Somali AgriFood
Fund
Somali AgriFood
Fund
The Sectors Supported

14. SOMALI DIASPORA INVESTMENT SURVEY REPORT
Global Migration Group Presentation
The Somali diaspora Investment Survey Report was co-funded by Shuraako and IFAD, and conducted by Shuraako
Shuraako is a program of the One Earth Future Foundation

15. SDIS Survey: Motivation and Goals
Convincing evidence that diaspora contributions to Somalia are fundamental for growth and development
To better understand the nature of and motivations behind the Somali diaspora’s financial contributions to the region
Convincing evidence that diaspora contributions to the homeland are fundamental growth and development
SDIS GOALS:
2) Design appropriate investment instruments and interventions for diaspora to successfully engage Somali opportunities

16. Why encourage Diaspora Investment?
Worldwide remittances in 2015 were estimated to be $450 billion
$1.3 billion plus flowed into Somali regions (25% of GDP) in 2014
If invested, remittance capital could be leveraged to accelerate development
Somalis held an estimated $1.8 billion in savings in 2010
Remittances often meet basic needs, but are not a sustainable strategy for long-term development
Fragility of transfer system, dependence on remittances as sole source of income
Remitter fatigue around continued support for daily needs and generational differences in commitment to remit
Diaspora investment plays a key role in scaling up MSMEs in countries origin
Diaspora have unique motivations that make them willing to invest in risky environments

17. Diaspora Connections to Somali Regions:
Majority of Somalis left the country in 1991 after political collapse
Average respondent reported living outside of the Somali region for 20 years, representing well-established diaspora communities
Strongly correlates with the financial stability necessary to remit and invest
90% of respondents still have family living in Somali regions
Strong financial ties and interest in the region:
56.6 % of respondents reported owning a home in Somali regions
31.4% of respondents reported owning or partially owning a business in Somali regions

18. SDIS Approach & Respondent Demographics
Focus Groups: 8 cities, 11 total groups
Individual Interviews
Online Survey: 900+ respondents representing 33 countries
Demographics
Age span: 16-77; Average age: 39
75% married
87% men
24% home owners
89.5% born in Somalia
Explain the first two as narrative building
Here perhaps explain story of Somali entrepreneurs moving remits to investments (though state this came through several times it was not a dominant narrative….probably b/c not a lot of people have that kind of capital)
Online survey as a way to collect evidence

19. Financial Ties to the Region:

20. Investment Motivations:
Very general but we got more specific. Asked people to rank numerous measures including business plan development, profitability, growth potential, contribution to local economy, family needs, portfolio diversification, etc. Found out that:
Most imp. Factors are well developed business plan, evidence of profitability, and presence of enforceable contract.
Least important: pressure from diaspora community and political pressure.

21. Investors and Investments:
Many respondents identified as Somali investors
For those individuals, the most common investment sectors were agriculture, real estate, and education…
Who are investors?
Many are actively investing outside of somalia as well
Many investing in Somali businesses as bus. Owners
Most from US, Sweden, uk, canada, denmark, kenya. More frequent investors from UK and Canada (overrep populations)
Investments 5k to 100k.
Lots of sectors
What matters for investment?
Interpersonal trust.
Data on trust: trust business partners, family, friends….less likely to trust local banks, diaspora community, or intl. institutions (though we did find that people wanted to engage with these entities….conclusion: not sufficient developed yet to actively engage now)

22. Investment Vehicles:
We are able to break this up by various categories: diaspora, own somali business, remittance sender, age
Interesting findings:
for diaspora members and remitters, co-investment opportunities (with other diaspora members) are preferred over direct investment. Although not consistent with the total population, this is nonetheless unsurprising.
For younger individuals, co-investments, mutual funds and public shares received a similar percentage of interest. Older individuals, however, expressed much less enthusiasm for mutual funds than any other investment type.

23. Investment Obstacles:
Asked about risk tolerance-found most people are moderately risk tolerant by common measures. Somali investors are slightly more risk tolerant….not surprising but means risk, something many people would worry about in Somalia, probably not as significant as conceived
How can we overcome risk? Better financial instruments and terms
Better information
Matching grants
Up-front assurances
Professionalizing the banks

24. Summary of the 9 Recommendations from the SDIS:
Local Capacity Building:
Institutions & Businesses
Data & Information Sharing
Financial Products & Assurances
Strengthen capacity of local actors to provide demand-driven business development services
Support development of effective chambers of commerce & business associations
Encouraging formal data collection & commission relevant market research in partnership with local entities
Encourage information-sharing through diaspora investor networks and encourage diaspora investor “meet-ups”
Partner with SFIs to champion “savings-to- investment” campaigns
Support credit products that leverage locked-up real estate value
Provide tangible assurances to diaspora investors
Develop mutual funds that offer varied risk profiles, target key sectors, and produce a double bottom line
Promote community development finance

25. LOCAL CAPACITY BUILDING
DATA & INFORMATION SHARING
FINANCIAL PRODUCTS 1
Strengthen Capacity of Local Actors to Provide Demand-Driven Business Development Services (BDS)
Improved access to BDS will formalize the operations of Somali firms, increasing investor confidence
Figure 21 in this slide indicates that the single largest factor for investment decision making is a well developed business plan, which would be enhanced greatly by a more developed BDS industry.

26. LOCAL CAPACITY BUILDING
DATA & INFORMATION SHARING
FINANCIAL PRODUCTS 2
Supporting Development of Effective Chambers of Commerce & Business Associations
Chambers and business associations have the potential to be advocates for Somali enterprises, and source information for diaspora investors
Currently diaspora investors report highest trust in those they know personally, which limits their access to potential investments
Figure 16 demonstrates the low level of confidence in local chambers of commerce amongst respondents, particularly the diaspora, as a source of trusted investment information.

27. DATA & INFORMATION SHARING
LOCAL CAPACITY BUILDING
RECOMMENDATION #3
DATA & INFORMATION SHARING
FINANCIAL PRODUCTS
Encourage Formal Data Collection and Market Research in Partnership with Local Chambers and Ministries 3
Develop local capacity to produce reliable, industry specific research
Figure 29 demonstrates that diaspora investors see finding reliable investment information is a significant obstacle to investment. While it is the sixth most significant factor listed here, the first five are larger systematic symptoms of political instability and a lack of reliable investment information is the only factor that can effectively be addressed in the short to medium term without resolving larger instability.

28. LOCAL CAPACITY BUILDING
DATA & INFORMATION SHARING
FINANCIAL PRODUCTS
Encourage Information Sharing Through Diaspora Investor Networks & “Meet- Ups” that are Built Around Investors’ Profiles 4
Since diaspora investors rely largely on personal networks for information, diaspora investor “meet-ups” & networks provide an opportunity for investors to leverage these networks and broaden access to investment information
Figure 30 demonstrates that respondents felt favorable about pooling funds with other diaspora members as a form of investment risk mitigation.

29. LOCAL CAPACITY BUILDING
DATA & INFORMATION SHARING
FINANCIAL PRODUCTS 5
Partnering with Somali Financial Institutions (SFI) to Champion Savings-to-Investment Campaigns
Savings-to-investment schemes can play a unique role in identifying and leveraging Somali remittances, already being sent to the Somali regions, by increasing local capital reserves available to microcredit
Among respondents, remitters outnumbered active investors by more than 4 to 1
Local savings and credit products should harness the power & volume of remitters
The core objectives of the IDFR strengthen the ability for funds to flow, and in the case of Somalia, for Diaspora Investment to increase
Almost 5 times as many respondents identified themselves as remitters than did investors, highlighting the importance of savings to investment schemes for leveraging remit funds for development.
The fact that the majority of respondents report owning a home in Somalia highlights the potential of hybrid mortgage products for unlocking diaspora capital.

30. LOCAL CAPACITY BUILDING
DATA & INFORMATION SHARING
FINANCIAL PRODUCTS 6
Support Credit Products that Leverage Locked-Up Real Estate Value (Hybrid Mortgage Products)
Hybrid mortgage products allow valuable real assets to become collateral to secure loans, unlocking a pool of capital otherwise captive, which can be used for investment
Almost 5 times as many respondents identified themselves as remitters than did investors, highlighting the importance of savings to investment schemes for leveraging remit funds for development.
The fact that the majority of respondents report owning a home in Somalia highlights the potential of hybrid mortgage products for unlocking diaspora capital.

31. FINANCIAL PRODUCTS
RECOMMENDATION #7-#8 7
Provide Tangible Assurances to Diaspora Investors, Such as Credit Guarantee Schemes (CGS)
CSGs catalyze investment into high risk markets while building local financial capacity by ensuring capital is locally held and managed
This graph is intended to highlight the difference between more active, risk tolerant investors and less active, more risk averse investors and the need to develop investment instruments and schemes that cater to the preferences of each.

32. FINANCIAL PRODUCTS
RECOMMENDATION #7-#8 8
Develop Mutual Funds that Offer Varied Risk Profiles, Target Key Sectors, and produce a Double Bottom Line
Mutual funds address the preferences of respondents by providing a co-investment product with various risk profiles that achieve both financial & social impact
This graph is intended to highlight the difference between more active, risk tolerant investors and less active, more risk averse investors and the need to develop investment instruments and schemes that cater to the preferences of each.

33. FINANCIAL PRODUCTS
RECOMMENDATION #9
Promote Community Development Finance including Infrastructure Bonds and Risk Insurance 9
Infrastructure bonds provide a means for diaspora investors to contribute to the community development that supports their friends and family
The graph demonstrates the significance of social motivations for diaspora investors which this recommendation addresses
Providing risk insurance helps mitigate concerns over continued insecurity and political instability, which respondents identified as the most difficult obstacles to investment

34. QUESTIONS: Local Capacity Building: Data & Information Sharing
Institutions & Businesses
Data & Information Sharing
Financial Products & Assurances
Strengthen capacity of local actors to provide demand-driven business development services
Support development of effective chambers of commerce & business associations
Encouraging formal data collection & commission relevant market research in partnership with local entities
Encourage information-sharing through diaspora investor networks and encourage diaspora investor “meet-ups”
Partner with SFIs to champion “savings-to- investment” campaigns
Support credit products that leverage locked-up real estate value
Provide tangible assurances to diaspora investors
Develop mutual funds that offer varied risk profiles, target key sectors, and produce a double bottom line
Promote community development finance