Diaspora Remittance Inflow, Financial Development and the Industrialisation of Africa

Abstract

The paper assesses how remittances directly and indirectly affect industrialisation in a panel

Remittances, ICT and Doing Business in Sub-Saharan Africa

“…Recent literature is consistent with the position that remittances are as important as other external flows (i.e. foreign direct investment and foreign aid) in reinvigorating development in Africa, notably by boosting: output per worker (Ssozi & Asongu, 2016a); total factor productivity (Ssozi & Asongu, 2016b) and industrialization (Efobi et al, 2016). Other documented economic rewards include: cyclical features and less volatility in capital which increase reliability in external flows.…”

“…shows that since the beginning of the third millennium, corresponding remittances into SSA have stood above 1.5 as a percentage of GDP (Efobi et al, 2016). Second, as apparent in Figure 2, one of the principal characteristics over the past decade in SSA has been the substantial rise in the penetration of ICT, notably in: mobile phone penetration, internet penetration and fixed broadband subscriptions.…”

“…Whereas remittances have fundamentally been acknowledged as some kind of altruism that is designed to have some social insurance externalities (Agarwal & Horowitz, 2002;Kapur, 2004), advantages of remittances are not exclusively limited to rewards in households. According to Efobi et al (2016) It follows from the above that one can logically expect remittances to decrease constraints to doing business in developing countries. Such logic is in accordance with a substantial body of the literature, notably that, remittances are essential for: the growth and expansion of Mexican enterprises (Woodruff & Zenteno, 2001;Massey & Parrado, 1998); investment in entrepreneurship by Filipinos (Yang, 2008); positive long run investment in Bangladesh (Hossain & Hasanuzzaman, 2015); increasing agricultural investments that are market-oriented (Syed & Miyazako, 2013); enhancing farm and non-farm production in Ghana (Tsegai, 2004); boosting manufacturing growth (Dzansi, 2013); increasing per worker output (Ssozi & Asongu, 2016a) and augmenting total factor productivity (Barajas et al, 2009;Ssozi & Asongu, 2016b).…”

“…These include the following channels: exchange rate (see Rajan & Subramanian, 2005;Lartey et al, 2008;Acosta et al, 2009;Barajas et al, 2009;Selaya & Thiele, 2010;Dzansi, 2013;Amuedo-Dorantes, 2014) and financial sector development (Aggarwal et al, 2011;Bettin et al, 2012;Osabuohien & Efobi, 2013;Efobi et al, 2014;Kaberuka & Namubiru, 2014;Karikari et al, 2016;Efobi et al, 2016).…”

Analysis of Savings-Investment Gap in Sub-Saharan Africa: Does the nexus between Foreign Remittances and Domestic Financial Sector matter?

“…The proponents of foreign remittances argued for its relative stability and increment during economic downturns in the recipient country compared to foreign direct investment and foreign portfolio investment (Aggarwal, Demirgüç-Kunt and Pería, 2011). Other benefits of remittances to the recipient household or country include: improvement in recipient's standard of living, expansion of consumption and investment, relaxation of financial constraints, stability of institutions, promotion of industrialization through the financial development channel, and encouragement of investment in healthcare and education, among others (Bjuggren, Dzansi and Shukur, 2010;Efobi, Asongu, Okafor, Tchamyou and Tanankem, 2016;Qiang, Khurshid, Calin and Khan, 2019;Akindipe, 2020). On the other hand, the devastating impacts of higher remittances inflow in the recipient country include its ability to reduce the incentive to work and save, stoke inflationary pressures and drag economic growth through the real exchange rate appreciation channel (Acosta, et al, 2008;Sobiech, 2019).…”