Andiswa Abogile Jiza, Foreget Mingiri Kapingura
Abstract
Literature indicates that remittances promote economic growth in the presence of a well-developed financial sector. It is argued that remittances that are sent via the financial sector are translated to investment, which in turn contributes to economic growth. The objective of this study was to examine the effect of remittances on financial inclusion focusing on the 16 SADC countries. The importance of remittance inflows to the region emanates from them having surpassed other traditional financial flows. The data employed in the study was obtained from the World Bank and International Monetary Fund for the period 2010-2021. The Generalized Method of Moments was used in the study to take into account the endogeneity problem that may exist between the variables. The findings from the GMM estimations show that remittance inflows have a negative effect on financial inclusion in the SADC region. The findings from the study suggest that remittances do not have the capacity to improve financial inclusion in the region. The results also highlight that trade is an important factor in promoting inclusion in the SADC region. The results of this study have important implications for the SADC region. It is evident that remittances do not provide another channel that can enhance financial inclusion in the region. The study recommends that member states amend policies aimed at encouraging financial literacy programmes that will equip remittance receivers about the benefits of savings and investment rather than using all the remittance inflows for consumption. Financial intermediaries can also create savings and investment products that are linked to remittance accounts. The findings from the study suggest that there is need to treat remittances as not as cash-out only but to also consider using them for savings and investments. This will help smoothen future consumption because remittances are linked to external vulnerability such as job losses which make them unsustainable.