The Role of Remittances, Financial Inclusion and Governance on Economic Growth in Sub-Saharan Africa

Abstract

The goal of this study is to analyse the role of financial inclusion, governance, andremittances on growth in Sub-Saharan African countries (SSA), as well as themoderating influence of the role of financial inclusion on the remittances-growth nexus,using panel data spanning 1996–2020. Data were collected through secondary sources,including World Bank and IMF reports for the period 1996–2020. By using a principalcomponent analysis method, we constructed composite FI indexes to measure the degreeof FI. Cross-sectional dependence, slope homogeneity, and pooled mean grouping (PMG)are employed to evaluate the stated objectives. The study findings showed thatremittances have a significant positive relationship with economic growth, and thatpositive financial inclusion moderates the remittance-growth nexus in SSA countries.Given the findings that the level of governance has an adverse influence on growth, hencestakeholders should improve financial infrastructure, which provides the underlyinginstrument for financial inclusion, and protect customers by instituting controls andprocedures for reporting, fairness, and resorting to SSA countries. Governments shouldalso promote the larger global remittances agenda, which includes leveragingremittances for better consumer and business financing, and exposure to global financialmarkets through refinancing and the issue of diaspora bonds.JEL Classifications: C1; F6; G2; O4