The diaspora is the largest unbanked balance sheet

I. Opening

In Lagos, the Federal Mortgage Bank of Nigeria publishes a loan product aimed at Nigerians living abroad. The terms are unusual for the country. The rate is fixed at nine per cent per annum. The application fee is fifty US dollars. There is no requirement to fly home before signing. The borrower must contribute to the National Housing Fund for at least twelve months before becoming eligible, and the loan can finance a property in Lagos, Abuja, Port Harcourt, or Kano.[^1]

The same week, in the same city, a Nigerian commercial bank quotes a naira-denominated mortgage to a foreigner — including a Nigerian non-resident without local employment — at between twenty and twenty-eight per cent per annum.[^2] The Central Bank of Nigeria's monetary policy rate is twenty-seven per cent.[^3]

The gap between nine and twenty-five tells most of the story. FMBN's diaspora product is the exception, structured through a federal mortgage bank, subsidised by a national housing fund, available only to a country whose government has decided that its citizens abroad deserve treatment its citizens at home do not get. The twenty-five-per-cent number is what the market produces when no such scaffolding exists. It is what every other diaspora encounters, in every other corridor, when the question of credit comes up.

The Nigerian diaspora alone sends home more than twenty billion dollars a year.[^4] Multiply this scene by every Filipino in Dubai, every Ghanaian in London, every Argentine in Madrid, every Lebanese in Riyadh, every Brazilian in Florida, every Turk in Frankfurt, and the size of the question becomes visible. The diaspora is not an unbanked individual problem. It is the largest single unbanked balance sheet in the global economy.

What follows is an attempt to measure that balance sheet, to explain why the lending industry has so far failed to address it, and to set out what now changes.

II. The size of the balance sheet

Remittances are the cleanest part of the picture. According to the World Bank's KNOMAD partnership, recorded flows to low- and middle-income countries reached six hundred fifty-six billion dollars in 2023, and were projected to grow by 2.3 per cent through 2024.[^5] The number understates the reality. It captures only flows passing through formal channels — banks, money-transfer operators, and licensed remittance services. Informal flows are estimated to add between thirty and seventy-five per cent on top, depending on the corridor.[^6]

To this must be added the stablecoin layer, which formal statistics have only recently begun to capture. Chainalysis estimates that sub-Saharan Africa received more than two hundred and five billion dollars in on-chain value between July 2024 and June 2025, up fifty-two per cent year on year.[^7] Latin America grew sixty-three per cent. The Asia-Pacific region grew sixty-nine per cent. A meaningful proportion of these flows are not speculative trades but cross-border settlement, savings, and transfer activity. In sub-Saharan Africa, eight per cent of all transferred value sat below ten thousand dollars per transaction, compared with six per cent globally — a signal that the activity is retail, not institutional.[^8]

USDT and USDC dominate this layer. The two assets together processed monthly volumes that, at their 2025 peak, ran into the trillions.[^9] A reasonable estimate places the stablecoin balance held by diaspora communities and emerging-market households at well above two hundred billion dollars, with retail wallets concentrated in Nigeria, Argentina, Turkey, the Philippines, Brazil, and Lebanon.[^10] These holdings are not idle. They are an emergent form of household reserve currency, held precisely because the local one is not trusted to preserve value.

The third layer is the most invisible: property and savings held back home. A Filipino nurse in Saudi Arabia who has been remitting for twenty years has, typically, financed a house. A Lebanese engineer in the Gulf has very often financed the construction of a family compound. A Nigerian doctor in the United Kingdom holds title to a duplex in Lekki. None of these assets appears on a global balance sheet. None of them is recognised as collateral by any institution other than the family that occupies it.

A conservative estimate stacks these layers — formal remittances, informal flows, stablecoin balances, and diasporic real estate — at well above three trillion dollars. The number is approximate, and it is certainly understated. The point is not its precision. The point is that this is a balance sheet larger than the gross domestic product of all but a handful of countries, owned by people whose access to credit, in the jurisdictions where their economic identity actually lives, is essentially negligible.

A balance sheet has two sides. On one side are these assets. On the other should be a credit market that recognises them. What exists in its place, today, is something else entirely.

III. Why the banks will not lend

The default explanation for the absence of credit to the diaspora is that banks do not understand them. This is incorrect. Banks understand them perfectly well. The reasons banks do not lend are structural, and they fall into three categories.

The first is the asymmetry between the borrower's economic life and the lender's regulatory perimeter. A Nigerian doctor based in Manchester earns pounds, holds British property, and pays British tax. Her local bank knows her in this geography. Her bank in Nigeria knows nothing about her, because her economic activity, her credit history, and her income verification all live in jurisdictions it cannot reach. Cross-border income verification, in the absence of bilateral data-sharing agreements, is a manual and uneconomic exercise. The bank could do it for a six-figure mortgage. It cannot do it for the volume of applications a real diaspora product would generate.

The second is the foreign-exchange layer. A bank in Lagos that lends naira to a borrower paid in pounds is taking unhedged currency risk on a long-duration product. Most central-bank frameworks in emerging markets do not permit local banks to take such positions on a large scale, and where they do permit it, the hedging cost makes the product unviable for the borrower. The alternative — to lend in pounds to a borrower whose collateral is denominated in naira — runs into the same problem from the opposite direction, and exposes the bank to capital-controls risk, where the borrower may be unable to convert pounds back into naira to make repayments. The Bank of Ghana, the Central Bank of Nigeria, and the Banco Central de la República Argentina have, at various points in the last five years, imposed capital controls that would have rendered such products non-performing within months.[^11]

The third is the regulatory cost of cross-border consumer lending. Under Basel III, a bank's capital charge depends on the risk weighting of its loan book. A loan to a non-resident with a foreign income source and foreign-jurisdiction collateral attracts the highest risk weights available. Combined with provisioning requirements under IFRS 9, the cost of carrying such loans on a balance sheet makes them unattractive even before the operational complexity is factored in. The economics work for the very largest banks, on the very largest tickets, for the very wealthiest clients. They do not work for the median diaspora borrower seeking a mortgage of fifty thousand euros.

FMBN works, in Nigeria, because it is not a commercial bank. It is a federal mortgage bank with a sovereign mandate, a subsidised funding base through the National Housing Fund, and explicit pricing far below the cost the commercial market would require. The Moroccan equivalents — Attijariwafa Bank's MDM Plus, Bank of Africa BMCE's offer, and the Banque Centrale Populaire's diaspora products — operate similarly, with backing from a state that has decided remittances are a strategic asset.[^12] None of these institutions exists outside a sovereign decision to subsidise. None of them serves a population that lacks such a sovereign sponsor. None of them is structurally scalable across borders.

The diaspora is not unbanked because banks are uninformed. It is unbanked because banking, as currently structured, was not built to bridge two economic identities at once. The infrastructure was built around residency, and residency is precisely the thing the diaspora does not have in the country where it wants to invest.

IV. The twenty-five-per-cent penalty

When credit does reach the diaspora outside the exceptional structures above, it does so at a price.

A naira-denominated mortgage offered to a non-resident Nigerian in 2026 is priced, as noted, at between twenty and twenty-eight per cent per annum.[^13] A peso-denominated mortgage in Buenos Aires, in a country whose inflation rate has averaged above one hundred per cent in recent years, is offered at rates that exceed sixty per cent — when offered at all. A Lebanese pound mortgage no longer exists in any meaningful form. The Argentine, Lebanese, and Venezuelan diaspora cases sit at one end of the spectrum, where local credit has collapsed entirely. The Nigerian, Ghanaian, and Turkish cases sit closer to the middle, where credit exists but its cost makes leveraged home-ownership economically irrational.

The Filipino case is more nuanced, because the peso is more stable and local mortgage rates run between seven and ten per cent — but a non-resident Filipino without local employment will not get those terms, and will typically be offered between twelve and fifteen per cent if any product is offered at all. The Brazilian case is similar. The Cameroonian and Senegalese cases involve currencies pegged to the euro (the Central African and West African francs) and would in theory permit lower rates, but the institutional depth required to underwrite cross-border diaspora products simply does not exist outside of programmes built by Moroccan or French parent banks.

Behind the formal credit market lies an informal one, denominated in family obligation. The diaspora finances homes back home, very often, by collecting cash from siblings, deferring savings for years, and paying upfront. Surveys conducted by IFAD and the OECD across multiple diasporas estimate that more than forty per cent of remittance flows go directly into informal real-estate investment or family loans, without intermediation.[^14] This is rational at the household level. It is, at the economic level, an enormous misallocation of capital. Money that could be leveraged at a four-to-one ratio against productive assets, generating compound returns, is instead deployed as cash, foregoing both leverage and time-value.

The cost is not merely the foregone return. It is also the foregone scale. A diaspora borrower who can access credit at ten per cent against eighty per cent of property value can deploy five times more capital than one who must pay cash. Across the global diaspora, this difference compounds into hundreds of billions of dollars of foregone real-estate, business, and infrastructure investment per year. The remittance industry has spent a generation reducing the friction on the transfer leg of the journey. It has spent almost no time on the credit leg, which is where the real economic value sits.

The slogan attached to this publication — *you live here, you build there* — describes an ambition that the financial industry, until very recently, did not have the tools to underwrite at scale.

V. Three things that have been tried

Three structural alternatives to bridge this gap have been attempted, with varying degrees of success.

The first is diaspora bonds. Pioneered by Israel in 1951 and used by India in the 1990s during balance-of-payment crises, diaspora bonds raise sovereign debt from a community abroad at below-market rates, leveraging emotional and patriotic capital. The Israeli case raised more than forty billion dollars over decades. The Indian case raised more than eleven billion dollars across three issuances.[^15] These are the successes. The failures are more instructive. Ethiopia attempted three diaspora-bond issuances between 2008 and 2011 and raised, against expectations of three billion dollars, less than seventeen million.[^16] Nigeria's 2017 diaspora bond raised three hundred million against a target of three billion. Kenya's 2011 effort failed similarly. The pattern is clear: diaspora bonds work when the sovereign relationship is one of trust and the issuance is timed to a moment of geopolitical urgency. They do not work as a structural financing channel.

The second is the dedicated diaspora microfinance institution. Several have been launched — Crédit Mutuel Sénégal, several smaller players in Morocco and Tunisia, a handful of cooperatives in the Philippines. The track record is mixed. The smaller institutions struggle to scale beyond a single corridor. The larger ones, having scaled, find that the unit economics of cross-border consumer lending under traditional regulatory frameworks remain marginal. The Banque Centrale des États de l'Afrique de l'Ouest has issued supervisory guidance encouraging such institutions, but the structural cost issues described in section three remain.[^17]

The third, more recently, has been crypto-based remittance services. Companies including Stellar, Strike, MoneyGram via Stellar, Yellow Card in Nigeria, and a long list of stablecoin-rail providers in Latin America have driven down the cost of remittance from the Banque Mondiale's headline seven per cent to under one per cent on certain corridors.[^18] This is a real, measurable improvement, and it has reshaped the remittance industry. But it has not addressed credit. A faster transfer at lower cost is still a transfer. The borrower's relationship with capital remains transactional, not structural. The stablecoin has become a remittance rail. It has not become a collateral rail.

The asymmetry is worth dwelling on. The diaspora has, through the stablecoin layer, acquired a globally liquid asset that crosses any border at any time at very low cost. Banks, central banks, and the remittance industry have all spent the last five years catching up to this fact. What none of them has done is treat the asset as what it has structurally become: an instrument that can support credit, not just settlement.

VI. What collateralisation changes

A stablecoin held by a diaspora borrower is, from a balance-sheet perspective, indistinguishable from a US-dollar bank deposit. It is denominated in dollars, redeemable on demand, and held by a regulated issuer subject to monthly attestation of reserves — in the case of USDC, by Circle, registered under the European Union's Markets in Crypto-Assets regulation since 2024.[^19] The Bank for International Settlements has documented, in a recent working paper, that the stablecoin layer now displays the structural characteristics of a parallel cross-border payment system, with on-chain volumes correlated more closely to trade and remittance flows than to speculative crypto activity.[^20]

Once recognised as such, a stablecoin balance can be pledged as collateral against credit, exactly as a dollar bank deposit could be. The mechanism is straightforward. The borrower deposits a stablecoin balance with a regulated custodian. A credit institution — typically a fund or a credit vehicle constituted in a jurisdiction that recognises stablecoins as eligible collateral — extends a loan secured against that deposit. The loan is denominated in the borrower's preferred currency. The collateral is converted into a yield-bearing instrument: short-dated sovereign debt, money-market exposures, or, in the most structured cases, regulated real-estate funds.

The European regulatory framework now permits this with a clarity it did not have three years ago. The Alternative Investment Fund Managers Directive, in its second iteration, formally recognises private credit funds as eligible vehicles for cross-border lending, with passporting rights across the European Economic Area. The Markets in Crypto-Assets regulation provides the legal recognition of stablecoins as financial instruments. The Reserved Alternative Investment Fund regime in Luxembourg permits the constitution of such credit vehicles with a six-week incorporation timeline and no product-level approval from the Commission de Surveillance du Secteur Financier.[^21]

The combination is not theoretical. It enables a structure in which a Nigerian doctor in Manchester can deposit ten thousand dollars of USDC with a regulated custodian, receive a loan denominated in the currency of her choice for the construction of a property in Lekki, see her collateral generate yield from a French real-estate fund or a money-market exposure, and pay an effective interest rate substantially below what any Nigerian commercial bank would quote her. The mechanism is regulated end to end. The custodian is supervised. The fund manager is licensed. The lending vehicle is supervised at the manager level under AIFMD II. The borrower's economic identity in Manchester and her property in Lekki are bridged not by a bank willing to take cross-border risk, but by an asset — the stablecoin — that exists outside the residency-based assumptions of the banking system.

What this changes is the geometry of credit. The diaspora is no longer asking a Nigerian bank to underwrite a non-resident loan, or a British bank to underwrite a Nigerian property. Both institutions remain in their natural perimeter. The bridge is the collateral, not the institution.

VII. What comes next

The size of the addressable market is bounded by the size of the stablecoin balances held by diaspora communities. That number is growing rapidly. The Chainalysis data suggests that retail stablecoin holdings in the major diaspora source-countries have grown at compound rates of fifty to sixty per cent for three consecutive years.[^22] If the credit infrastructure to deploy these balances scales in the next two to three years, the implied lending market, conservatively estimated, is between fifty and one hundred billion dollars by 2030.

That number is small relative to the total diaspora balance sheet. It is enormous relative to the size of the cross-border consumer-credit industry today. It would represent, on its own, the largest single category of new private-credit issuance in Europe and Africa combined.

What is missing, at this stage, is institutional infrastructure. Three components need to mature in parallel. The first is the legal framework for cross-border collateral enforcement, where European choice-of-law instruments — particularly Rome I — already provide the foundation, but case law remains thin. The second is the supervisory recognition of stablecoin-collateralised lending at the level of national prudential regulators. The European Central Bank and the European Banking Authority have begun to engage with this question; the equivalent national bodies in source-country jurisdictions have not. The third is the operational infrastructure — custody, settlement, dispute resolution, identity verification — that turns a regulatory possibility into a deployable product.

The Israeli case in 1951, when the first diaspora bond was issued, illustrates how new financial instruments built around diaspora capital can change the trajectory of a national economy. The mechanism here is different. It is not sovereign issuance to a diaspora; it is private credit, intermediated by regulated funds, backed by a globally liquid digital asset, deployed against productive use in source countries. But the underlying intuition is the same. A diaspora is not merely a population that sends money home. It is a balance sheet, structured by migration, currently mis-priced by a financial system that did not anticipate it.

The mis-pricing is now visible. The instruments to correct it now exist. The question is no longer whether the credit market will form. It is which institutions will define its standards, and on whose terms it will operate.

In Lagos, the FMBN's nine per cent will remain available to those who qualify. In Buenos Aires, the peso mortgage will remain unavailable to most. In Manila, the local mortgage will remain priced for residents. None of these markets will be displaced. The new credit infrastructure does not compete with them. It addresses the population they have always failed to reach.