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

43 Pages Posted: 18 Jun 2020

See all articles by Sami Ben Naceur

Sami Ben Naceur

International Monetary Fund (IMF)

Ralph Chami

International Monetary Fund (IMF)

Mohamed Trabelsi

affiliation not provided to SSRN

Date Written: May 2020

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.

Keywords: Remittances; Financial inclusion; Financial Stability, Financial Development

JEL Classification: F36, G21, O16

Suggested Citation

Ben Naceur, Sami and Chami, Ralph and Trabelsi, Mohamed, Do Remittances Enhance Financial Inclusion in LMICs and in Fragile States? (May 2020). IMF Working Paper No. 20/66, Available at SSRN: https://ssrn.com/abstract=3630155

Sami Ben Naceur (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Ralph Chami

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-6039 (Phone)
202-623-6068 (Fax)

Mohamed Trabelsi

affiliation not provided to SSRN

No Address Available

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