Do diaspora remittances affect banking sector development in Sub Saharan Africa?

Abstract

Purpose – The purpose of this paper is to determine the effect of diaspora remittances on the banking sector development in Sub-Saharan Africa. Design/methodology/approach – This study makes use of panel regression analysis and simultaneously uses pooled regression, fixed effects and random effects on a sample of 23 Sub-Saharan African countries during the period 1994-2009. Findings – The empirical results confirm that diaspora remittances affect banking sector development in Sub-Saharan Africa. All the empirical models support this prediction. Similarly, it was also found that high inflation has a negative effect on banking sector development. Other notable findings are that well-developed human capital and political stability enhance the development of the banking sector. Practical implications – The study provides insights into the role of diaspora remittances in banking sector development in Sub-Saharan Africa. It provides evidence that attracting diaspora remittances for emerging economies could as w...