This initiative aims to mobilize savings from Senegalese living in Senegal and from the diaspora communities, helping them to invest in local productive initiatives.
Despite Senegal’s 6.7% GDP growth rate in 2017, nearly half of the country’s 15.4 million inhabitants live in poverty, with a concentration in rural areas (66% of poor, compared to 23% in Dakar). Although many poverty-reduction initiatives have been implemented over the years, economic growth is not leading to sufficient reduction of poverty. The decentralization process has not yet been able to trigger the desired local development in rural areas, and the lack of resources in and for secondary cities undermines development prospects. Moreover, due to poverty, migration to other countries is significant. Remittances thus play an important role in supporting families, but they also tend to widen economic disparities in local communities and motivate more migration as a result of social comparisons. At the same time, a large part of private savings is being invested in non-productive sectors (real estate, in particular).
The objective of this initiative is to develop Investment Clubs (ICs), targeting both Senegalese living in the country and those from the diaspora communities in West Africa, Libya, Mauritania, Europe and the United States, to help them engage in productive investments. By building financial and legal structures, providing financial education to the rising middle class and migrants, as well as offering technical assistance, this UNCDF initiative will strengthen the contributions of the diaspora’s South-South remittances to more inclusive development, by channelling them towards productive and economically viable investments with high social impact in secondary cities and rural areas.
The structuring of the ICs includes the establishment of investment funds, which will be supported by a matching grant to boost participants’ willingness to invest, while seeking social change alongside financial returns. The resulting fund is to be allocated in the form of seed capital to catalytic and bankable projects with strong developmental impact. These projects will be prepared and de-risked by UNCDF through the technical assistance of its mechanisms, in particular the Local Finance Initiative. The ICs initiative intends to be a demonstrative experience for the Senegalese middle class and diaspora groups to learn about how their savings can contribute to local economic development. When compared to other similar ongoing private initiatives in Senegal, the advantage of the Investment Clubs is linked to UNCDF’s capacity to source projects geared towards the achievement of the SDGs and to carry out feasibility studies for the selected initiatives until they reach financial sustainability. Indeed, the projects will benefit from UNCDF’s key dual system to asses and monitor their impacts as well as to provide technical assistance and capacity building so that the projects can reach a creditworthiness stage.
Activities already accomplished within this initiative include the elaboration of a market research aimed at identifying the key requirements expected from the ICs and developing the concept, and the definition of an investment strategy. In the long term, it is expected that the programme will impact local development through 20 Investment Clubs created, US$4 million of mobilized funds and 6,000 people educated on financial investment for social development. The initiative also paves the way to many development opportunities for other countries within West Africa, given the common challenge to develop saving habits and promote local-impact investments, and the shared opportunities offered by a rising middle class, the contribution of diaspora communities to a large portion of the GDP and a common economic union, ECOWAS. In a context of intense migration flows within the region, strengthened South-South Cooperation within ECOWAS could enable the scaling-up of the initiative in order to boost the engagement of the diasporas and rising middle-class to save and invest in projects with high local-development impacts.
Provider Country: Senegal
Beneficiary Country: Senegal
Supported by: UNDP
Implementing Agency: UNCDF and UNDP Senegal
Project Status: On-going
Project Period: November 2016 - beginning 2020