KOCHI: Kerala’s plan to raise funds through ‘diaspora bonds’ by tapping its 25 lakh expat community has moved a step closer with the government entrusting the task of mobilising the funds to Kerala Infrastructure Investment Fund Board (KIIFB).
KIIFB, the state government’s off-budget infra-fund raising outfit, has been tasked with fine-tuning various aspects of the bonds including the total amounts to be raised, interest rates to be offered etc. It is learnt that the government has decided to use the entire amount raised via the issue to fund the rebuilding of the state’s infrastructure that was devastated in the 2018 flood. The losses from flood are estimated at over Rs 25,000 crore.
A KIIFB officer told TNIE that the government has asked Fund to study if ratings are required for the bonds; whether it’s mandatory for the bonds to be listed in any of the GCC stock markets etc. As per the plan, the diaspora bonds will be raised through international and Indian financial institutions which have presence in the Gulf region, in addition to individual investors.
Through the diaspora bonds, the state government is eyeing the huge remittances by the Non-Resident Keralites (NRKs) community, which is reckoned to be about Rs 1.5 lakh crore a year, contributing 36.3 per cent of the state GDP.
Last May, KIIFB successfully raised USD 312 million (Rs 2,150 crore) through the ‘masala bonds’, which was later listed on the London Stock Exchange (LSE). The officer said the plan is to raise the funds mostly from the Gulf region, where most of the expatriate Keralites are based. Like the masala bonds, the diaspora bonds will be rupee-denominated, which will help the government to avoid losses due to the fluctuations of the currency.
ISRAELI MODEL CAN BE EMULATED
Francis Mathew, a former senior officer at the Asian Development Bank (ADB) said Israel served as a model for effectively employing diaspora bond as a perennial source for external capital by successfully “tapping the wealth, goodwill and patriotism” of the diaspora.
"The government established Development Corporation of Israel (DCI), issued bonds to Jewish diaspora and used it as a catalyst for economic development since 1951 thereby significantly reducing its dependency on foreign financing," said Mathew.
Similarly, in 2013, Nigeria raised USD 100 million through private placement of diaspora bonds. India too has occasionally raised funds from NRIs by issuing India Development Bonds (1991), Resurgent India Bond (1998) and India Millennium Deposits (2000). If the issue goes ahead as planned, KIIFB will become the first state-level institution in India to collect funds via diaspora bonds.