Migrant workers’ remittances: what is the impact on the economic and financial development of Sub-Saharan African countries?

Rocher, Emmanuel and Pelletier, Adeline. 2008. Migrant workers’ remittances: what is the impact on the economic and financial development of Sub-Saharan African countries? Banque de France Bulletin Digest(173), pp. 27-38. ISSN 1250-5862 [Article]

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Abstract or Description

Remittances from migrant workers have become a major source of financing for developing countries. Latin America and Asia have benefited since the mid-1990s from a particularly sustained rise in income transferred by their emigrant workers.

Migrant workers’ remittances have also increased in Sub-Saharan Africa (SSA), where they play an essential role in poverty alleviation. Moreover, they have the advantage of building a more stable source of external financing than official development assistance (ODA) flows and foreign direct investment (FDI) and, by sustaining private consumption they have a stabilising effect on these countries’ economies, acting as a buffer.

In contrast, their direct impact on long-term growth in SSA has not been established. Recent empirical studies carried out on this subject have not enabled a consensus to be formed, and the relationship between remittances and business investment is not clear-cut.

Nevertheless, workers’ remittances can have an indirect impact on growth by favouring financial development in the recipient countries. Increased formalisation of remittances from African migrant workers would contribute to this objective, by enabling the local financial systems to fully play their role in the allocation of resources.

While the increased formalisation of workers’ remittances is hindered by obstacles of a structural nature, notably the low financial depth in African economies, several avenues may nonetheless be explored. In sender countries, strengthened transparency and competition in the money transfer market could lead to a reduction in transfer costs. In recipient countries, improved access to financial services (notably via the growing role of microfinance and new payment technologies) and the continuation of structural reforms already underway are all important preconditions for increasing the efficiency of remittance transfers.

Item Type:

Article

Keywords:

Sub-Saharan Africa, Growth, Development financing, Financial sector, Migrant workers' remittances

Departments, Centres and Research Units:

Institute of Management Studies

Dates:

DateEvent
May 2008Accepted
July 2008Published

Item ID:

25078

Date Deposited:

28 Nov 2018 15:55

Last Modified:

29 Apr 2020 17:00

URI:

http://research.gold.ac.uk/id/eprint/25078

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