Do Remittances Enhance Financial Inclusion in LMICs and in Fragile States?

This paper explores the relationship between remittances and financial inclusion for a sample of 187 countries over the period 2004-2015

From:
Foreign, Commonwealth & Development Office
Published
26 January 2021
Document Type:
Working Paper
»Ê¹ÚÌåÓýappme:
Economic Growth
First published:
22 May 2020
Authors:
Naceur, S.B., Chami, R and Trabelsi, M

Abstract

This paper explores the relationship between remittances and financial inclusion for a sample of 187 countries over the period 2004-2015, using cross-country as well as dynamic panel GMM regressions. At low levels of remittances-to-GDP, these flows act as a substitute to formal financial channels, thereby reducing financial inclusion. In contrast, when remittance-to-GDP ratio is high, above 13% on average, they tend to complement formal access and usage channels, thus enhancing financial inclusion. This “U shaped� relationship highlights the role of remittance flows in financing household consumption at low levels, while raising formal household bank savings and allowing for more intermediation, at high levels of remittance-to-GDP.

This work is part of the ‘Macroeconomics in Low-income countries� programme

Citation

Sami Ben Naceur, Ralph Chami, Mohamed Trabelsi (2020) Do Remittances Enhance Financial Inclusion in LMICs and in Fragile States? IMF Working Paper No. 20/66

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Published 26 January 2021
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