Saving out of Remittances: Evidence from Ethiopia and Kenya

Abstract

This article examines the saving behaviour of remittance recipients in Ethiopia and Kenya. The few existing estimates of savings from remittances, often obtained indirectly using expenditure analysis, vary widely. The analysis presented here relies on ordinal saving categories reported in response to a direct survey question. The results reveal that the savings rate is higher in Kenya than Ethiopia, in the raw data and the multivariate model, although in both countries it rises with receipt size. Interestingly, gender is a robust predictor of differential savings, albeit with a contrasting pattern: women save more than men in Ethiopia, while the reverse is true in Kenya. In other results, a pre‐migration agreement about remittances has a strong positive effect on savings. Savings rates are also positively associated with financial inclusion in Ethiopia and formal channel flows in Kenya. Many of these results are confirmed by analysis of broader forms of saving/investment.

IFAD Research Series 56 the Impact of Migrants' Remittances and Investment on Rural Youth

“…Remittances have the potential to be a powerful conduit for financial access, particularly within a functional financial ecosystem (Efobi et al, 2015;Aggarwal et al, 2011). Remittances forward financial institutions' presence in rural and poor urban communities with remittance recipients, and foster demand for financial products through increasing people's current incomes (Ambrosius and Cuecuecha, 2016;Dendir, 2017). In rural communities, lack of access to financial services circumscribes youth's capacity to channel remittances into human capital investments, productive employment and entrepreneurship (Dávalos, 2017).…”