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, and
remittances on growth in Sub-Saharan African countries (SSA), as well as the
moderating 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 principal
component analysis method, we constructed composite FI indexes to measure the degree
of FI. Cross-sectional dependence, slope homogeneity, and pooled mean grouping (PMG)
are employed to evaluate the stated objectives. The study findings showed that
remittances have a significant positive relationship with economic growth, and that
positive financial inclusion moderates the remittance-growth nexus in SSA countries.
Given the findings that the level of governance has an adverse influence on growth, hence
stakeholders should improve financial infrastructure, which provides the underlying
instrument for financial inclusion, and protect customers by instituting controls and
procedures for reporting, fairness, and resorting to SSA countries. Governments should
also promote the larger global remittances agenda, which includes leveraging
remittances for better consumer and business financing, and exposure to global financial
markets through refinancing and the issue of diaspora bonds.
JEL Classifications: C1; F6; G2; O4