J. Y. Abor & M. Amidu
University of Ghana
ESRC Reference: ES/N013344/1: Delivering Inclusive Financial Development and Growth
Research Project Workshop
SOAS University of London
3rd – 4th March, 2017
• Motivating the study
• Remittances: Some stylised facts
• Review of related literature
• Model and estimation strategy
• Empirical results
• Conclusion
• In 2014 the total amount of remittances to Africa was $63.18 billion
(AfDB/OECD/UNDP, 2016).
• Consequently, as international remittance flows to Africa remain
robust, concerns are being raised about the potential implications of
these inflows for the banking system.
• However, empirical evidence on (banks –remittance nexus) needed for
policy direction is limited (Demirgüç-Kunt, Córdova et al. 2011).
• Demirgüç-Kunt et al. (2011) argue that remittances could lift or hurt the
banking sector.
• On the one hand, remittances could foster banking sector development.
• by increasing bank deposits,
• by allowing banks to earn fee income from transfers,
• by making it possible for banks to reach out to unbanked remittance recipients (i.e. financial inclusion)
• On the other had remittances could stifle banking sector development by
. easing difficulties in access to credit,
. reducing both the demand for credit and the amount of credit available in the banking
system
• Empirical evidence is therefore needed to test which of these effects is dominant
in Africa
• The extant literature is grouped into 3:
• Studies that have examined the effect of remittances on financial
development in general (Adenutsi, 2011; Chowdhury, 2011;
Cooray, 2012; Coulibaly, 2015; Gupta, Pattillo, & Wagh, 2009)
• Studies that looked at the link between remittances and banking
sector depth (Aggarwal, Demirgüç-Kunt, & Pería, 2011)
• Studies that assessed the effect of remittances on banking sector
breadth and depth (Brown, Carmignani, & Fayad, 2013;
Demirgüç-Kunt et al., 2011)
• Our study examines the effect of remittances on four channels
of banking sector development simultaneously:
•
•
•
•
Banking sector efficiency
Banking sector stability
Banking sector depth
Banking sector breadth
• Our contribution is to unravel the channels by which
remittances and monetary policy affect banking sector in
Africa
• In this study, we examine how remittances and monetary policy
affect various mechanisms of banking sector development Banking
sector:
•
•
•
•
Banking sector efficiency
Banking sector stability
Banking sector breadth
Banking sector depth
• Our contribution is to unravel how remittances and monetary policy
affect different channels of banking sector development in Africa
Average
2004-08
2009
2010
2011
2012
2013
2014
North Africa
16.39
18.84
24.08
25.97
30.35
29.43
31.26
Central Africa
0.21
0.33
0.28
0.56
0.46
0.52
0.51
East Africa
1.75
2.41
2.77
3.16
3.62
3.76
4.01
Southern Africa
1.66
1.71
2.00
2.12
2.03
1.82
1.61
West Africa
16.67
21.64
23.42
25.06
25.42
25.66
25.79
Total
36.68
44.93
52.56
56.87
61.89
61.20
63.18
GDP
Total remittances
to Africa as % of
GDP
1284.40 1629.30 1936.48 2149.38 2298.91 2388.01 2461.50
2.86
2.76
2.71
2.65
2.69
2.56
2.57
70.0
Current USD, billion
60.0
50.0
40.0
30.0
20.0
10.0
0.0
2000
2001
2002
2003
Low-income-countries
2004
2005
2006
2007
2008
Lower-middle-income countries
2009
2010
2011
2012
2013
Upper-middle-income countries
2014
Banking Sector Development Indicator
Depth
Private credit by deposit money banks to GDP (%)
Private credit by deposit money banks and other
financial institutions to GDP (%)
Deposit money banks' assets to GDP (%)
Breadth
Bank accounts per 1,000 adults
Bank branches per 100,000 adults
Efficiency
Bank net interest margin (%)
Cost to income ratio (%)
Stability
Bank Z-score
Bank nonperforming loans to gross loans (%)
2011
2012
Year
2013
World
SSA
World
37.6
16.4
39.3
38.4
16.4
41.2
40.2
16.5
42.8
43.7
15.7
45.7
40.0
16.3
42.3
SSA
World
SSA
16.4
45.1
21.0
16.4
48.9
20.8
16.6
49.8
22.8
16.6
52.7
23.8
16.5
49.1
22.1
World
SSA
World
SSA
433.1
132.2
14.1
3.7
461.0
157.9
13.2
3.8
499.1
153.4
13.9
4.2
653.5
157.7
15.5
4.1
511.7
150.3
14.2
3.9
World
SSA
World
SSA
4.2
6.6
55.8
60.0
4.1
6.1
55.0
60.9
3.8
6.4
56.2
61.2
2.7
3.7
51.5
49.5
3.7
5.7
54.6
57.9
World
SSA
World
SSA
10.0
8.0
4.1
5.6
9.9
8.4
4.1
4.6
9.9
7.7
4.4
5.1
9.9
7.7
4.4
5.2
9.9
8.0
4.2
5.1
2014
Average
Measures of banking sector
development (BSD)
Measure of
remittances
Authors
Geogra-phy Method
Data
Freq./Time
span
Key finding
Depth -Bank deposits/GDP; Bank
credit to private sector/GDP
Breath -No. of branches and
deposit accounts per capita;
Depth -Bank deposits/GDP and
bank loans/GDP
Bank efficiency -Banks’ net
interest margin/total assets and
banks’ overhead costs/total assets
Depth: Deposit banks’ assets/GDP,
liquid assets/GDP, bank credit to
private sector/GDP
Depth -Domestic credit to private
sector/GDP
Breadth -Having a bank account
Remittances as a % of
GDP
% of households
receiving remittances
Aggarwal et
al. (2011)
DemirgüçKunt et al.
(2011)
109 DCs
SGMM
Remittances promote financial depth
Mexico
Tobit
Annual
1975–2007
Cross-sectional
data
Remittances as a % of
GDP
Cooray (2012)
94 non-OECD
countries
Pooled OLS
and SGMM
Panel (Annual)
1990–2010
Cash remittances
received; proportion of
households that
received cash
remittance;
remittances as a % of
GDP
Brown et al.
(2013)
Azerbaijan
and
Kyrgyzstan
2SLS and
Probit
Annual
1970–2005
Cross-sectional
Remittances increase financial sector
size in countries with low government
ownership, but increases the efficiency
of financial sector in countries where
government ownership of banks is
high
Remittances negatively affect
financial development and financial
literacy
Remittances promote banking sector
development (breadth and depth)
Measure of
financial
development (FD)
Authors
Geography
Method
Data Freq./Time
Span
Key finding
Size and
concentration of
banking sector,
measures of banking
sector health,
external funding
sources
Elbourne & de
Haan (2006)
11 transition
countries
SVAR
Monthly
Monetary policy and financial
structure unrelated
Sign restrictions
(interest rate rises,
output and prices
do not fall)
Probability of
distress (financial
instability)
De Graeve,
Kick, &
Koetter (2008)
Germany
VAR
Annual
1995-2004
Unexpected tightening of monetary
policy increases financial instability
T-bill rate
Profitability,
probability of bank
failure (instability)
Cadet (2009)
Developing
countries
Modelling
No data
Tightening monetary policy increases
financial instability
Measure of
monetary policy
(MP)
Interest rate
• We model banking sector development as a function of remittances,
monetary policy and other controls as follows:
• Where BSDit is a measure of banking sector development, Remitit is
remittances flow/GDP, MPit is monetary policy stance. Xit is a vector
of control variables often included in standard financial development
models.
• These controls include
• trade openness,
• financial openness, savings and
• institutional quality.
• 𝛾𝑖 depicts country fixed effects,
• 𝛿𝑡 captures time effect while 𝜀𝑖,𝑡 is the random error term.
• The subscripts i and t represent country and time respectively.
• To resolve the endogeneity of remittances, we employ two stage least
squares (2SLS) as the estimation strategy
• The following tests/measures are taken to ensure the validity of
estimates:
• Wald Chi-square test for joint significance of coefficients,
• the Woolridge’s overidentifying restrictions test of which the null hypothesis is
that the instruments are valid,
• Woolridge’s robust score test for exogeneity of which the null hypothesis is
that remittances is exogenous,
• Robust regression exogeneity test of which the null hypothesis is that
remittance is exogenous.
Variable
Definition
Measures of Banking sector development
Bank credit
Domestic credit to the private sector provided by
banks/GDP
Financial credit
Credit provided by the financial system (both public and
private)/GDP
Domestic credit
Total domestic credit to the private sector/GDP
Mean
Med.
Std. Dev.
Data Source
21.1562
15.7361
17.0591
GFDD
44.0444
28.3699
47.2708
GFDD
35.0747
19.9068
34.2109
GFDD
Broad money
Annual broad money growth
Accounts
No. of accounts per 1,000 people
Branches
Bank branches per 100,000 people
Interest margin
Net interest margin
Z-score
Bank Z-score
Measures of monetary policy stance
Lending rate
Lending interest rate
Deposit rate
Deposit interest rate
Discount rate
Central bank discount rate
16.5354
239.9416
5.9067
6.5932
15.1199
14.3923
124.6874
3.3909
5.7494
13.5343
15.4350
274.0828
7.2832
3.8081
9.6564
GFDD
GFDD
GFDD
GFDD
GFDD
17.7611
7.1939
11.5271
16.0704
5.0000
10.0000
8.4002
5.6586
7.3017
WDI
FAS
FAS
Remit
Control variables
Savings
Openness
Trade
Institutions
Personal remittances/GDP
3.8498
1.7148
7.5666
WDI
Gross savings/GDP
Foreign direct investment/GDP
Total trade/GDP
Institutional quality
11.8161
4.0836
71.8319
-0.2638
11.5027
2.2746
64.1912
-0.2790
16.4631
5.7808
35.4562
0.2912
WDI
WDI
WDI
WGI
Bank
credit
Financial
credit
Domestic
credit
Accounts
Branches
Interest
margin
Z-score
Deposit
rate
Lending
rate
Discount
rate
Opennes
s
Savings
Bank credit
Financial credit
1.0000
0.8495*
1.0000
Domestic
credit
Accounts
Branches
Interest margin
0.8951*
0.9237*
1.0000
0.6377*
0.5302*
-0.4271*
0.3963*
0.4726*
-0.4659*
0.6622*
0.5462*
-0.5000*
1.0000
0.7833*
-0.2470*
1.0000
-0.2816*
1.0000
Z-score
0.3115*
0.2738*
0.1420
0.1410
0.1655
-0.2263*
1.0000
Deposit rate
Lending rate
-0.0788
-0.3750*
-0.1035
-0.3318*
-0.1274
-0.3976*
-0.0096
-0.2415
-0.0827
-0.2214
0.4652*
0.6008*
-0.1620
-0.0189
1.0000
0.8040*
1.0000
Discount rate
-0.2855*
-0.4089*
-0.5547*
-0.1844
-0.3202*
0.4411*
-0.0997
0.8068*
0.8053*
1.0000
Openness
0.0070
-0.1195
-0.0899
0.1254
0.1983*
0.1052
-0.2104*
0.0303
0.0208
-0.0921
1.0000
Savings
0.1272
-0.0032
0.1999
0.1278
0.1297
-0.1799*
0.0975
-0.1283
-0.2127*
-0.3283*
-0.0740
1.0000
Trade
Institutions
Remit
0.1061
0.5131*
0.0368
-0.0268
0.2223
0.1194
0.0975
0.4321*
0.0189
0.3447*
0.5094*
0.1492
0.5125*
0.4817*
0.0446
-0.0096
-0.0869
-0.0158
-0.0739
0.1666
0.0570
-0.0921
0.1126
-0.1177
-0.1704
-0.1488
-0.1166
-0.1338
0.0392
0.0314
0.5077*
0.1185
0.1884*
-0.0652
0.0327
-0.5739*
Trade
1.0000
0.3109*
0.4901*
Institution
s
1.0000
0.1168
Remit
1.0000
(1)
(2)
(3)
(4)
(6)
(7)
(8)
Accounts
Branches
Interest margin
Z score
Variables
Bank credit
Remit
4.304***
47.34**
74.77**
3.497***
33.32***
0.467
-0.458***
9.934***
(0.967)
(22.25)
(33.96)
(0.825)
(6.320)
(0.355)
(0.167)
(2.032)
0.119
2.961
4.489
-1.130**
-0.0396
-0.0534
0.313***
0.960***
(0.407)
0.353
(0.470)
1.320***
(0.301)
-0.556***
(0.116)
4.226***
(0.581)
37.41***
(8.818)
(2.362)
-2.817
(2.860)
-4.561***
(1.671)
-0.800*
(0.479)
40.19***
(14.60)
71.66
(66.23)
(3.546)
-3.517
(4.419)
-7.983***
(2.615)
-1.354*
(0.746)
59.66***
(21.82)
112.5
(103.7)
(0.480)
0.366
(0.428)
1.117***
(0.255)
-0.361***
(0.108)
3.559***
(0.466)
64.86***
(9.740)
(3.569)
4.560
(5.033)
11.26***
(1.870)
-0.888
(0.955)
21.51***
(7.827)
83.18
(109.0)
(0.106)
0.0851
(0.101)
0.214**
(0.0939)
0.0724**
(0.0349)
0.491**
(0.211)
-2.113
(3.377)
(0.105)
-0.0625
(0.0495)
-0.150***
(0.0550)
0.0630**
(0.0250)
-0.327**
(0.146)
0.821
(2.546)
(0.315)
-0.397
(0.537)
-0.957***
(0.268)
-0.205**
(0.103)
7.933***
(1.790)
18.70*
(9.708)
287
35
94.65***
1.6438
(0.4396)
42.0837***
212.598***
131
35
12.14*
4.4707
(0.1070)
39.557***
73.584***
131
35
14.34**
3.5466
(0.1698)
41.0157***
76.7272***
286
35
198.27***
0.1115
(0.9457)
57.1015***
61.8617***
156
35
60.75***
1.3815
(0.5012)
31.7253***
87.8968***
208
35
70.31***
1.46034
(0.4818)
11.5487***
13.1612***
240
35
91.67***
0 .3027***
(0.8595)
12.0935***
13.4001***
131
35
31.96***
3.4313
(0.1798)
31.4701***
103.3660***
MP (Lending rate)
Openness
Savings
Trade Open
Institutions
Constant
Diagnostics
Observations
No. of Countries
Wald Chi2 (stat)
Woolridge’s OIR
Woolridge Rob.
Rob. Reg.
Domestic credit Financial credit Broad money
(5)
Variables
Remit
MP (Deposit rate)
Openness
Savings
Trade
Institutions
Constant
Diagnostics
Observations
Wald Chi2(stat)
Woolridge’s OIR
Woolridge Rob.
Rob. Reg.
(25)
Bank credit
5.279***
(0.957)
0.685*
(0.369)
0.462
(0.526)
1.732***
(0.295)
-0.566***
(0.117)
4.108***
(0.539)
22.64***
(5.608)
(26)
Domestic credit
32.56***
(7.210)
3.739*
(1.978)
-3.494*
(1.875)
-3.240***
(0.862)
-0.468
(0.345)
27.90***
(5.645)
64.12**
(29.13)
387
83.04***
1.9739
(0.3727)
49.9998***
266.958***
162
26.85***
6.9036
(0.0317)
38.9646***
148.183***
(27)
(28)
Financial credit Broad money
51.23***
5.948***
(10.94)
(0.984)
4.644
0.239
(3.038)
(0.415)
-3.799
0.604
(2.901)
(0.623)
-5.731***
2.065***
(1.380)
(0.292)
-0.727
-0.494***
(0.525)
(0.134)
39.59***
4.295***
(8.323)
(0.582)
95.80**
29.52***
(45.73)
(6.995)
(29)
Branches
0.827***
(0.300)
0.00730
(0.104)
0.160
(0.106)
0.340***
(0.0761)
0.0478
(0.0339)
0.773***
(0.188)
-4.516**
(2.169)
(30)
Accounts
43.86***
(8.099)
10.92**
(4.476)
6.617
(5.027)
15.35***
(2.317)
-1.040
(0.920)
27.64***
(8.194)
-114.8*
(65.35)
(31)
Interest margin
-0.744***
(0.170)
0.272***
(0.0782)
-0.150**
(0.0621)
-0.251***
(0.0456)
0.0941***
(0.0274)
-0.515***
(0.154)
4.049***
(1.417)
(32)
Z score
0.439
(0.308)
-0.853***
(0.164)
-0.0975
(0.119)
0.154
(0.100)
-0.0920**
(0.0421)
0.818***
(0.210)
25.58***
(2.205)
162
26.44***
6.6023
(0.0368)
39.3079***
159.777***
272
63.47***
2.3072
(0.3155)
27.541***
31.2425**
*
212
63.84***
0.2932
(0.8636)
34.1447***
109.757***
325
88.74***
0.0193
(0.9904)
24.744***
28.4862***
316
92.96***
0.6368
(0.7273)
0.0102
0.0098
386
116.52***
0.6119
(0.7364)
80.1153***
99.0466***
Variables
Remit
MP (Discount rate)
Openness
Savings
Trade
Institutions
Constant
Diagnostics
Observations
Wald Chi2(stat)
Woolridge’s OIR
Woolridge’s Rob.
Rob. Reg.
(33)
Bank credit
(35)
Financial
credit
25.91***
(7.170)
2.235
(2.101)
-1.116
(1.951)
-2.808***
(0.894)
-0.272
(0.385)
15.07***
(5.847)
20.61
(43.90)
(36)
Broad money
(37)
Branches
(38)
Accounts
2.119***
(0.340)
-0.844***
(0.250)
0.189
(0.226)
0.578***
(0.120)
-0.359***
(0.0595)
2.121***
(0.301)
42.27***
(4.645)
(34)
Domestic
credit
12.28***
(3.177)
1.107
(0.942)
-0.968
(0.813)
-0.848**
(0.360)
0.0102
(0.171)
8.098***
(2.630)
5.350
(19.26)
34.90***
(4.761)
-0.896
(3.610)
-4.433
(5.088)
11.54***
(1.522)
-2.662**
(1.048)
21.56***
(5.795)
187.0**
(81.07)
(39)
Interest
margin
-0.558***
(0.141)
0.256***
(0.0630)
-0.0296
(0.0651)
-0.156***
(0.0302)
0.105***
(0.0373)
-0.403**
(0.177)
0.826
(2.171)
3.845***
(0.629)
-1.941***
(0.471)
0.253
(0.444)
1.122***
(0.213)
-0.505***
(0.124)
4.317***
(0.624)
76.37***
(9.036)
0.386***
(0.145)
-0.360***
(0.0919)
-0.0391
(0.0627)
0.155***
(0.0373)
0.00281
(0.0367)
0.596***
(0.149)
6.976***
(1.999)
227
83.22***
0.3680
(0.8319)
47.3364***
49.8305***
96
44.59***
0.4916
(0.7821)
19.0566***
119.424***
96
46.54***
0.6136
(0.7358)
21.9292***
149.543***
227
106.70***
0.2233
(0.8944)
65.5013***
64.5726***
161
77.85***
3.4920
(0.1745)
19.5486***
27.6935***
(40)
Z score
0.807**
(0.408)
-0.591***
(0.158)
-0.282**
(0.131)
0.0907
(0.107)
-0.242***
(0.0921)
1.428***
(0.342)
39.21***
(4.836)
119
104.46***
2.2497
(0.3247)
41.3687***
243.713***
188
78.31***
0.5657
(0.7536)
14.2304***
17.0692***
179
70.18***
0.0418
(0.9793)
2.5319
2.6104
Variables
Remit
MP (Lending rate)
Openness
Savings
Trade
Institutions
Constant
Diagnostics
Observations
Wald Chi2(stat)
Woolridge’s OIR
Woolridge’s Rob.
Rob. Reg.
(9)
Bank credit
(10)
Domestic
credit
(11)
Financial
credit
(12)
Broad
money
(13)
Accounts
(14)
Branches
(15)
Interest
margin
(16)
Z score
4.013**
-36.59*
-43.97*
2.368*
21.18***
1.421
-0.107
12.43***
(1.631)
(20.60)
(23.67)
(1.335)
(6.426)
(1.005)
(0.111)
(3.621)M
-0.398
-9.632*
-13.53** -2.453***
-6.768
0.334
0.417***
1.924*
(0.606)
1.117
(1.244)
1.347**
(0.632)
-0.628***
(0.173)
5.975***
(1.156)
49.17***
(17.68)
(5.552)
4.295*
(2.586)
2.459
(2.519)
-1.795***
(0.368)
-17.50
(15.49)
335.3***
(84.11)
(6.400)
6.888**
(3.480)
1.924
(2.874)
-2.845***
(0.450)
-22.01
(17.83)
492.5***
(97.25)
(5.608)
23.96***
(8.530)
9.053***
(2.744)
-1.110
(0.975)
8.648
(7.564)
196.7
(149.3)
(0.276)
1.218*
(0.659)
0.569*
(0.316)
-0.0623
(0.0873)
1.002**
(0.496)
-11.01
(9.159)
(0.0493)
-0.242*
(0.135)
-0.0514
(0.0408)
0.0361*
(0.0193)
0.00832
(0.100)
-0.923
(0.977)
(1.137)
-0.945
(0.923)
-1.312**
(0.563)
-0.101
(0.116)
9.792***
(3.257)
-0.714
(15.98)
(0.611)
1.171
(0.915)
0.883
(0.545)
-0.324**
(0.139)
3.234***
(0.882)
86.63***
(16.87)
176
94
94
176
105
125
138
53.00***
31.44***
68.43***
68.51***
22.13***
12.73**
105.21***
3.7299
4.02416
4.28452
1.3042
0.1208
0.4051
4.2340
(0.1549)
(0.1337)
(0.1174)
(0.5210)
(0.9414)
(13.7735)
(1.0096)
27.9548*** 9.5716*** 9.4927*** 14.4032*** 15.878*** 13.7735***
1.0096
46.7101*** 47.4447*** 45.988*** 16.2112*** 27.006*** 17.1646***
0.9389
94
17.44**
0.4575
(0.7955)
31.7206***
169.052***
Variables
Remit
MP (Lending rate)
Openness
Savings
Trade
Institutions
Constant
(17)
Bank credit
(18)
Domestic
credit
(19)
Financial
credit
(20)
Broad
money
(21)
Accounts
(22)
Branches
(23)
Interest
margin
(24)
Z score
4.698
-0.849
-0.0277
13.35
15.00**
0.0571
3.741
7.178***
(6.053)
(1.229)
(1.176)
(20.12)
(7.540)
(0.0727)
(4.579)
(1.595)
-0.714*
-0.380**
-0.136
-1.221
1.394
-0.0159
0.150
1.048**
(0.404)
-0.00721
(0.211)
-0.346**
(0.173)
0.177
(0.149)
0.939***
(0.355)
15.88**
(7.910)
(0.176)
-0.142
(0.342)
0.103
(0.119)
0.383***
(0.0948)
-4.079
(3.667)
-11.81
(11.82)
(0.314)
-0.729
(0.598)
-0.341
(0.227)
0.337**
(0.139)
1.392
(3.825)
11.16
(12.74)
(1.287)
-0.141
(0.614)
-0.653
(0.503)
0.421
(0.472)
1.732***
(0.606)
19.15
(22.29)
(1.758)
0.0264
(0.754)
-1.014
(0.756)
1.007*
(0.516)
25.78***
(6.467)
106.4
(78.66)
(0.0215)
0.0347***
(0.00865)
-0.0136
(0.0213)
0.0145***
(0.00515)
0.0772
(0.138)
1.779
(1.135)
(0.392)
-0.0165
(0.133)
-0.0143
(0.179)
0.0646
(0.135)
-0.797**
(0.326)
-5.149
(5.889)
(0.439)
0.00726
(1.006)
0.122
(0.247)
-0.581***
(0.200)
23.69***
(5.109)
78.34***
(15.18)
111
30.42***
0.2869
(0.8663)
1.3987
1.3316
37
81.79***
3.8939
(0.1427)
2.2489
5.1727*
37
118.54***
0.4622
(0.7937)
0.0939
0.0735
110
22.65***
0.5935
(0.7432)
6.1555**
5.4505**
51
174.52***
1.6965
(0.4282)
1.9725
2.3214
72
89.19***
3.0939
(0.2129)
0.6853
0.5797
102
22.21***
2.0405
(0.3605)
0.9040
0.9488
37
31.06***
0.1287
(0.9377)
11.193***
137.949***
Diagnostics
Observations
Wald Chi2 (stat)
Woolridge’s OIR
Woolridge’s Rob.
Rob. Reg.
• There is evidence that remittances reduce banking sector inefficiency
while promoting depth, breadth and stability.
• Remittances significantly help stabilise banks in low income countries
and in middle and high income countries.
• An increase in remittance inflows and contraction of monetary policy
are associated with a lowering of banking sector efficiency.
• In all samples, monetary tightening boosts banking stability while
reducing banking sector depth and efficiency.
• Clearly, remittance holds great potential for advancing the
banking sector in Africa
• This potential can be tapped by:
• Encouraging the receipt of remittances through formal channels
• Making access to finance easy for all citizens
• Reducing the costs of sending/receiving remittances
• The results call for a tactful use of contractionary monetary
policy by central banks in order to attain a balanced
development of the banking sector.