When conflict or a climate disaster hits, a country may need more money than it can raise at home. Roads, homes and power systems may need rebuilding as the economy comes under pressure. One possible source is its diaspora.
Diaspora bonds turn that connection into an investment. But caring about a country does not automatically mean people will lend it money. They also need to believe that the government will use the funds properly and repay them.
What are diaspora bonds?
A diaspora bond is a loan a government raises by selling bonds mainly to people living abroad who have citizenship, family or ancestral ties to the country. Investors lend money and are promised interest, as well as repayment of the original amount on an agreed date. Governments can use the funds for things such as infrastructure and public projects. The OECD describes diaspora bonds as government debt securities marketed to people abroad who retain a connection to their country of origin.
They are different from donations and remittances. A donation does not need to be repaid. Remittances are usually money sent to family members to support daily expenses. A diaspora bond is an investment, so the government has a formal obligation to repay it.
How are they different from regular bonds?
A regular government bond is bought by investors comparing its return with the risk of lending to that government. A diaspora bond targets a particular group: people who may also be motivated by a personal connection and the wish to support their country of origin.
That connection can help a government attract money, sometimes at a lower cost. But investors still want to know whether the government can repay them and whether the bond is safe and legal to buy where they live.
How today's instability and climate pressures affect them
Political instability can push diaspora investment in two directions. Conflict may increase the desire to help, but it can also raise doubts about repayment, misuse of funds, sanctions or banking restrictions that could interrupt payments.
Geography and climate change create a similar tension. Countries facing water shortages, rising seas, droughts or floods may need investment in dams, drainage and stronger infrastructure.
The International Organization for Migration's 2026 submission to the UN climate finance process identifies diaspora bonds as one possible source of climate finance, while noting that diaspora contributions are not yet consistently integrated into national climate plans. A crisis can increase the need for diaspora investment without increasing investors' willingness to take the risk.
What makes a diaspora bond work?
The OECD points to a few conditions. People must trust the government, understand where the money will go and be able to see how it is spent. The bond must also be legal and easy to buy where the diaspora lives, with clear terms for interest, repayment and risk. Currency matters too: if investors are repaid in a currency that has lost value, their money may be worth less than they expected.
A specific project is easier to understand than a general request to support the budget. Investors can follow its progress and see what their money is helping to build. The OECD's review of diaspora bond programmes highlights trust, transparency, accountability and compliance with financial rules as important conditions for success.
Israel: diaspora bonds helped address a water challenge
Israel shows how a sustained diaspora bond programme can support a project shaped by geography. The country has limited freshwater, and it is not evenly available across regions. Completed in 1964, the National Water Carrier moves water from the north and central parts of the country towards the drier south. The Israeli Ministry of Foreign Affairs describes it as a response to regional differences in water availability.
Money raised through Israel Bonds contributed to several national projects, including the National Water Carrier, according to the Jewish Telegraphic Agency's historical account. Its success was not simply patriotism. The OECD notes that Israel built a long-running outreach programme, marketed bonds to diaspora communities and registered issuing organisations under the financial rules of key countries where investors lived. Since 1951, the programme has raised more than US$44 billion.
Diaspora bonds did not fund the entire water system. They helped direct overseas savings towards a real infrastructure need created by geography.
Ethiopia: when political concerns weaken diaspora investment
Ethiopia offers a contrasting example. The government sought diaspora investment for electricity projects, including the Grand Ethiopian Renaissance Dam on the Blue Nile. The dam promised more power but became politically sensitive because Egypt and Sudan feared its impact on Nile water flows, leaving a wider dispute over how the river should be shared. The United Nations University describes the project as a continuing water diplomacy challenge.
The bond effort struggled to attract the expected investment. In 2011, the World Bank reported that sales of an earlier bond for the Ethiopian Electric Power Corporation had been slow. Investors questioned whether the utility could repay them, whether the government could be trusted as guarantor and whether political risks were too high. The later effort to raise diaspora money for the dam also attracted limited resources. The OECD identifies concerns about governance, political repression, a lack of transparent monitoring and objections to the project itself.
The problem was not a lack of care among Ethiopians abroad. Their connection could not overcome doubts about how the investment would be managed, and the bond failed to become a significant funding source for the dam. It was never designed to settle the Nile dispute with Egypt and Sudan; that required an agreement between governments. But Ethiopia could not rely on this channel to support a project at the centre of the disagreement.
The real value of diaspora bonds is earned
In a crisis, governments often appeal to shared identity. But diaspora bonds work best when that appeal is backed by clear rules, a repayment plan and proof that the money is being used as promised.
Governments should explain what a project will achieve, how progress will be measured, who will oversee the funds and what happens if costs rise. This is especially important for climate projects, where damage and delays can affect results and repayment.
People abroad can remain connected to a country's future even when they cannot return. But the strongest diaspora bond is not the most emotional appeal. It gives investors reason to believe their money will make a difference and that the government will honour its agreement.
References:
International practices in return, reintegration, and diaspora engagement: Ukraine’s strategic response to the displacement crisis. (2026). OECD. https://www.oecd.org/en/publications/ukraine-s-strategic-response-to-the-displacement-crisis_9b773da4-en/full-report/international-practices-in-return-reintegration-and-diaspora-engagement_2eed40c9.html
UN Migration. (2026). Submission to the UNFCCC Standing Committee on Finance: 2026 Forum on financing climate action in water systems and the ocean (pp. 1–(first few pages)) [Climate finance report]. https://unfccc.int/sites/default/files/resource/IOM%20Submission%20SCF%20Special%20Forum%202026.pdf
ArchiveAuthor. (2000, June 8). Facts about Israel Bonds. Jewish Telegraphic Agency. https://www.jta.org/archive/facts-about-israel-bonds
Adja-Kwesi, W. (2025, July 2). The grand Ethiopian renaissance dam - a water diplomacy challenge. United Nations University. https://unu.edu/publication/grand-ethiopian-renaissance-dam-water-diplomacy-challenge