The Diaspora's Missing Layer

Hello,

My name is Joe Kinvi, and I’m the CEO of Borderless. This is the first Borderless Letter, a series of letters touching on various topics ranging from cross-border investments to the diaspora.

The diaspora is scattered across the globe. Millions of us are everywhere but our home country, often in search of a better life. Some leave for love, some for education, and some because large organisations spotted their talent and hired them.

I often hear that once you're abroad, you feel alone. I didn’t feel it until I started working because I moved with my family, but as I entered the professional sphere, I felt the loneliness for the first time. You don't meet many people of colour, especially in the workplace. That frustration led us to start the African Professional Network of Ireland in 2016.

We often overlook how we are organising in many other areas of life. The easiest one is the church. Many of us go every Sunday, and beyond faith, the church has always been the number one place of organisation for the diaspora.

When I moved into the investment space, we struggled to connect with the wider diaspora, but we knew they existed because we are very much online. In 2020, when Clubhouse was hot, there were rooms with a ton of the diaspora in them. The deeper I dug into how we could invest together across the diaspora, the more I found myself returning to one specific gap. There is a layer missing.

I made a surprising discovery lately. Remittance apps have unintentionally been organising the diaspora. Why? Many of us send money home every month through these apps.

I have used Western Union for as long as I can remember. Now it is mostly LEMFi, though my family still use the others. The organisational part is subtle. To give you much better fees, sometimes free, these apps pool all the money in one place. UK, US, Canada. Then they either do one transfer to the other side or, in most cases, keep a float, which is essentially a balance. So when you put your money in here, they give your family money over there. That model is low-cost to run and lets them build at scale across multiple jurisdictions.

I was at a recent event at the Commonwealth Secretariat in London. The roundtable was on diaspora investments, and people were shocked that remittance companies were not in the room. My response was that diaspora investments have not yet proven to be profitable. Once it is proven, they will show up.

Back to my point. Remittance companies have long been organising the diaspora to send money home. The only thing is, the folks in the apps aren't talking to each other. They are unofficially organised to enable companies to generate profit. That is how the business works.

This is where the missing layer becomes obvious. With diaspora investments, the organisation layer has not yet been built. To make it profitable, we need to pool capital to reduce transfer fees and enable cross-border floats, so that moving investment capital from A to B becomes profitable. More importantly, that capital needs to move into much lower-risk asset classes. Given that the risk-free return rate in Africa is around 15%, there is clearly a lot of money to be made.

To mobilise diaspora capital, three things have to happen.

The first is organisation. Where are they? How much money do they have? Do they have savings? People say the diaspora doesn't have a lot of money. Fine. If they don't have much capital individually, they need to pool it.

The second is education. You can't educate without organising. Education and organisation can also coexist. You organise, you educate while organising, and then you get people through the investment pipeline.

The third is investment in and repatriation of returns. Everyone is talking about diaspora investments, but no one is talking about how investors can get their funds back.

This part takes time. The investment process is a trust-building process. And trust building takes time. You need to go through multiple cycles with the diaspora for them to trust you.

Here is how the cycle works.

⇒ You present an opportunity.

⇒ They invest.

⇒ The investment matures and is profitable.

⇒ They get the money back.

That is a full cycle.

In an ideal world, a cycle takes a year, maybe two. But instruments like commercial papers in Nigeria are often as short as 90 days. So when you can put very low-risk instruments in front of people for 90 days, that cycle can actually be shortened with low-risk, short-term asset classes.

Somebody might start with £1,000. They put money in, get it back, and the return is better than what they would have made in the UK. They reinvest. After two, three, or four cycles, evidence of capital growth appears. This allows investors to deploy more capital, because people invest more when they have more money.

Many don’t know these instruments exist because Africans don't talk when making money. They admit loss but not profit. We need to unlearn this, but I get the black tax. When talking within your circle, you should all be on the same level so they don't feel they need to take from you. Instead, they see your success and might aspire to do the same.

This cycle works very well in low-risk asset classes. I am not talking about buying Nvidia. That is a whole different skill (Check out the stock pickers academy to learn more about this). I am talking about Gambian diaspora bonds, fully backed by the Gambian government and their central bank. But you need clear rails to deploy capital at low cost and get your return. That is where Borderless comes in, enabling the deployment and repatriation of this capital.

If you currently have £100,000, many African banks are willing to meet with you since they have subsidiaries in London. However, if you call them with just £2,000, the conversation changes completely. But if you combine your funds with others, a collective lead can speak to the bank on your behalf. This way, you gain access to the same opportunities as wealthy individuals. It’s a completely different game.

Moving to this level requires trust. It requires technology. It requires a platform. It requires work and time.

The organisation acts as the foundation and the missing piece. Building it is the key lever for the diaspora. Our challenge is to scale this process, and I have dedicated all my waking hours to making it happen.

If you want to see what we're building, start at www.onborderless.com