Remittance and Financial Inclusion: Global Evidence from Migrant-Sending Countries

Abstract

Remittances have been classified as "private transfers for consumption," though they can also serve as a means to access financial services, which adds an additional layer of significance. This paper proposes a new research agenda to study the relationship between remittance receipt and financial inclusion in countries of origin, and under which specific circumstances is there a link? This article outlines a new interdisciplinary global research agenda on the relationship between remittance receipt and financial inclusion in countries of origin, and under which specific conditions is there a relationship? The work is based on three theories, namely financial intermediation theory, the capability approach, and institutional theory, to conceptualize financial inclusion as multidimensional access to, use of, and quality of formal financial services. An integrated country-year design that integrates bilateral remittance inflows and costs, Global Findex indicators, macroeconomic controls, digital connectivity, institutional quality and financial-sector depth is proposed. The commonly adopted empirical approach is a dynamic panel setup under the assumption of country and year fixed effects. Three mechanisms are distinguished – liquidity and savings, transaction formalisation and digital diffusion. It also examines how remittances can be unequal in their impact if they are not received by any household with identification, connectivity, trust and/or access to an affordable account.