The necessity of financial inclusion for enhancing the economic impacts of remittances

Abstract

International remittances by immigrants to their home countries is key in the funding development in migrant-sending countries. This study investigates the combined impact of international remittance inflows and financial inclusion on economic growth using a sample of 60 low- and middle-income countries over 1996–2017. The study constructs a composite financial inclusion index using principal component analysis. The results show that financial inclusion could strengthen the growth-enhancing effect of remittances. Thus, the study helps explain the development dilemma of remittance inflows and financial inclusion in migrant-sending countries to boost their economic growth.