Impact of Remittances in emerging economies

Apr 15, 2024 | Research

Abstract —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.