Diaspora Remittances and Financial Inclusion in Kenya
##plugins.themes.bootstrap3.article.main##
This study examined the effect of diaspora remittances on financial inclusion in Kenya for a quarterly period from 2008 to 2018. The Kenyan government’s commitment to include the Kenyan diaspora into the national development process led to the launching of Kenyan Diaspora Policy in 2015 as part of the Kenya’s vision 2030 blue print of which financial inclusion is a pillar. This study sought to check if the policy interventions achieved its objective by testing the moderating effect of Diaspora Policy on the relationship between diaspora remittances and financial inclusion. The descriptive research design specifically longitudinal and explanatory non-experimental designs were employed in this study. The target population for this study comprised the three million Kenyans living at the diaspora. The census and stratified sampling design were utilised where census method was first used to include the formal diaspora remittance inflows for the forty four quarterly period and then stratified into corridors for the period under study. Data from the Central Bank of Kenya and Kenya National Bureau of Statistics were analysed using time series multiple regression model. The results of the study showed that formal diaspora remittances received had a positive and statistically significant effect on financial inclusion. Formal diaspora remittances from Rest of the World greatly influenced financial inclusion. Remittance inflows from North America also influenced financial inclusion to some extent while formal diaspora remittances from Europe had no effect on financial inclusion in Kenya. Further, the study established that the moderating effect between formal diaspora remittances and financial inclusion was positive and statistically significant implying that the diaspora policy implemented by government greatly influenced diaspora remittances and financial inclusion in the right direction in Kenya. The study recommended among others, that government of Kenya continues to strategically strengthen the diaspora policies in order to increase the flow of diaspora remittances into the country to boost financial inclusion.
Downloads
References
-
N. Aboulezz, “Remittances and economic growth nexus: empirical evidence from Kenya,” International Journal of Academic Research in Business and Social Sciences, vol. 5, no. 12, pp. 285-296, 2015.
Google Scholar
1
-
G. A. Aga, and M. S. Peria, “International remittances and financial inclusion in Sub-Saharan Africa.” World Bank Policy Research Working Paper, no. 6991, 2014.
Google Scholar
2
-
A. H. Welsh, “Robust estimation of smooth regression and spread functions and their derivatives,” Statistica Sinica, pp. 347-366, 1996.
Google Scholar
3
-
R Aggarwal, D. Asli,and M. Peria, “Do workers remittances promote financial development,” Journal of Development Economics, vol. 96, no. 2, pp. 255-264, 2011.
Google Scholar
4
-
R. Aggarwal, A. W. Horowitz, “Are International Remittances Altruism or Insurance?” Journal of Development Economics, vol. 30, no. 11, pp. 2033-2044, 2002.
Google Scholar
5
-
G. A. Akerlof, “The market for “lemons”: Quality uncertainty and the market mechanism,” The Quarterly Journal of Economics. vol. 84, no.3, pp. 488 – 500, 1970.
Google Scholar
6
-
S. E. M. Akumbo, R. A. Nyaaba, and D. A. Akologo, “Remittances and financial inclusion in Ghana,” International Journal of Business, Economics and Law, vol. 16, no. 5, pp. 39-51, 2018.
Google Scholar
7
-
A. Al-Tarawneh, “The role of workers’ remittances in development of Jordanian banking sector,” International Journal of Business and Economics Research, vol. 5, no. 6, pp. 227- 234, 2016.
Google Scholar
8
-
C. Ambrosius, “Remittances and Financial Access: Is There Really a Link and for Whom? Evidence from Mexican Household Data,” The World Economy, 2015.
Google Scholar
9
-
C. Ambrosius, and A. Cuecuecha, “Remittances and the use of formal and informal financial services,” The World Development, vol. 77, no. C, pp. 80-98, 2016.
Google Scholar
10
-
D. Anzoategui, A. Demirguc-kunt, and S. Martinez, “Remittances and financial inclusion: Evidence from Elsavador,” World Development,” vol. 54, pp. 338-349, 2014.
Google Scholar
11
-
M. Baron, and A. Kenny,”The Moderator-Mediator Variable Distinction in Social Psychological Research: Conceptual, Strategic and Statistical Considerations,” Journal of Personality and Social Psychology, vol.51, no. 6, pp. 1173- 1182, 1986.
Google Scholar
12
-
R. Brown, F. Carmignani, and G. Fayad, “Migrants remittances and financial development: Macro and micro-level evidence of a perverse relationship,” The World Economy, vol. 36, no. 5, pp. 636 – 660, 2013.
Google Scholar
13
-
Buencamino and Gorbunov, “Informal Money Transfer Systems: opportunities and challenges for development finance,” DESA Discussion Paper of the United Nations Department of Economics and Social Affairs, United Nations, no. 26, New York, 2002.
Google Scholar
14
-
Central Bank of Kenya, “Commentary on Diaspora Remittances,” Nairobi, Kenya, 2018.
Google Scholar
15
-
Central Bank of Kenya, “Commentary on Diaspora Remittances,” Nairobi, Kenya, 2019.
Google Scholar
16
-
R. Chami, C. Fullenkamp, and S. Jahjah, “Are Immigrant Remittance Flows a Source of Capital for Development?” IMF Working paper, vol. 1, no. 189, 2003.
Google Scholar
17
-
C. R. Cooper, and P. S. Schindler, Business Research Methods, 11th Ed., Boston: 2011, McGraw-Hill.
Google Scholar
18
-
A. Demirguc-Kunt, E. L. Cordova, P. Martinez, M. S. and, C. Woodruff, “Remittances and Banking Sector Breadth and Depth. Evidence from Mexico,” Journal of Development Economics, vol. 95, no. 2, pp. 229 – 241, 2011.
Google Scholar
19
-
A. Demirguç-Kunt, and R. Levine, “Stock markets, corporate finance, and Economic growth: An overview,” World Bank Economic Review, vol. 10 no. 2, pp. 223- 239, 2008.
Google Scholar
20
-
M. El Qorchi, S. M. Maimbo and J. W. Wilson, “Informal Funds Transfer Systems: An Analysis of the Informal Hawala System,” A Joint IMF-World Bank Paper. Occasional Paper No.222. International Monetary Fund, Washington, D.C., 2003.
Google Scholar
21
-
C. Filippo, R. Lensink, M. Van den Berg, and R. S. Juárez, “The impact of remittances on financial inclusion in Veracruz,” Mexico, Wageningen University, 2014.
Google Scholar
22
-
Financial Sector Deepening Kenya, Working towards the development of an inclusive financial ecosystem for all Kenyans: Fin Access National Survey, 2019.
Google Scholar
23
-
C. L. Freund, and N. Spatafora,“Remittances: transaction costs, determinants, and informal flows,” World Bank Policy Research Working Paper, no. 3704 , 2005.
Google Scholar
24
-
P. N. Githaiga, “Do Remittances Stimulate Private Sector Investment? A Case of Sub-Saharan Africa,” European Journal of Business and Management, vol. 6, no. 29, 2014.
Google Scholar
25
-
IFAD & World Bank Group, (2015). The use of remittances and financial inclusion. G20 Global Partnership for Financial Inclusion Report.
Google Scholar
26
-
J. Li, J. Salinas, T. Ramirez, C. Hoyo, and, C. Serrano, “Do remittances foster financial inclusion in Mexico?” Financial Inclusion Economic Watch, BBVA Research, 2014.
Google Scholar
27
-
R. E. B Lucas, and O. Stark, “Motivations to Remit: Evidence from Botswana,” Journal of Political Economy, vol. 93, no. 5, pp. 901-918, 1985.
Google Scholar
28
-
M. O. Mbutor, and I. A. Uba, “The impact of financial inclusion on monetary policy in Nigeria,” Journal of Economics and International Finance, vol.5 no. 8, pp. 318, 2013.
Google Scholar
29
-
R. Misati, and A. Kamau, “Do Migrant Remittances Matter for Financial Development In Kenya?” The Kenya Bankers Association (KBA) Working Papers, no. 30, WPS/08/18, 2018.
Google Scholar
30
-
K. Ocharo, “Remittances and economic growth in Kenya,” International Conference on Dynamics of Rural Transformation in Emerging Economics, pp. 27-28, 2014.
Google Scholar
31
-
M. Saunders, P. Lewis, and A. Thornhill, Research methods for business students. Pearson Education ltd, London, 2019.
Google Scholar
32
-
M. Shahbaz, I. Rehman, and T. Afza, “Macroeconomic Determinants of Stock Market Capitalization in an Emerging Market: Fresh Evidence from Co-integration with Unknown Structural Breaks,” Macroeconomics and Finance in Emerging Market Economies, vol. 9, no. 1, pp. 75-99, 2015.
Google Scholar
33
-
S. Shrestha & N. K. Joshi, Remittances and Financial Inclusion: Evidence from Nepal, New York University, Shanghai, China, 2018.
Google Scholar
34
-
M. Spence, “Job market signaling,” The Quarterly Journal of Economics, vol. 90, no. 4, pp. 629–649, 1973.
Google Scholar
35
-
O. Stark, “The Economics of International Labour Migration,” Population Studies, vol. 44, no. 1, pp. 181-182.
Google Scholar
36
-
J. E. Stiglitz, and A. Weiss,”Credit rationing in markets with imperfect information,” The American economic review, vol.71 no. 3, pp. 393-410, 1981.
Google Scholar
37
-
H. Toxopeus, and R. Lensink, “Remittances and financial inclusion in development,” Development Finance in the Global Economy, pp. 236-263, 2008.
Google Scholar
38
-
E. Uchenna, S. E. Osabuohien, and S. Oluwatobi, “One dollar, one bank account: remittance and bank breadth in Nigeria,” Journal of International Migration and Integration, vol. 16, no. 3, pp. 761-781, 2015.
Google Scholar
39
-
H. A. White, “Heteroskedasticity Consistent Covariance Matrix Estimator and a Direct Test for Heteroscedasticity,” Econometrica, vol. 48, no. 4, pp. 817 – 838, 1980.
Google Scholar
40
-
World Bank Group, Migration and remittances; Developments Brief and, World Bank Report. Washington, D.C., 2019.
Google Scholar
41
-
World Bank Group & KNOMAD Migration and remittances; Recent Developments and Outlook, World Bank Report. Washington, D.C., 2018.
Google Scholar
42