Migrant Remittances and Financial Inclusion in Africa: A Dynamic and Long-Run Approach

Migrant Remittances and Financial Inclusion in Africa: A Dynamic and Long-Run Approach

Abba Yadou Barnabe
Copyright: © 2021 |Pages: 16
DOI: 10.4018/978-1-7998-4817-2.ch010
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Abstract

The main objective of this chapter is to examine the effect of migrant remittances on financial inclusion in Africa from 2004 to 2017. Thus, the authors constructed a composite index of financial inclusion using principal component analysis (PCA). In addition, they examine the effect of remittances on financial inclusion using a system GMM and a pooled mean group (PMG). It is found that remittances have a negative effect on financial inclusion in the short run and a positive effect in the long run. Moreover, remittances have a negative long-term effect on the use of financial services and a positive long-term effect on access to financial services. This implies improved policies to both attract the flow of remittances through formal channels and improve financial inclusion.
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Literature Review

Reasons for the positive impact of migrant remittances on financial inclusion include the increasing amount that leads to a demand for a bank account (Efobi et al. 2015; Ambrosius and Cuecuecha, 2016), reducing the risk of information asymmetry (Roa, 2015) which increases the creditworthiness of remittance recipients with lenders (Orozco and Fedewa, 2006; Chuc et al. 2019). Finally, it leads to the promotion of financial literacy that eventually leads to financial inclusion (Yoshino et al., 2017).

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