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Do Remittances Enhance Financial Inclusion in LMICs and in Fragile States?
Author:
Samy Ben Naceur
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,
Mr. Ralph Chami
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, and
Mohamed Trabelsi null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2020: Issue 066
Language:
English
Publication Date:
22 May 2020
DOI:
https://doi.org/10.5089/9781513545394.001
ISBN:
9781513545394
ISSN:
1018-5941
Pages:
42
Keywords:
WP; remittance inflow; Remittances; Financial inclusion; Financial Stability; Financial Development; remittance flow; squared remittance; effect of remittance; inflows to GDP; GMM estimator; Commercial banks; Financial sector development; East Asia; South Asia; Asia and Pacific; banking sector matter; income level
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund