Advertisement

Remittances, Regulation, and Financial Development in Sub-Saharan Africa

  • James Busumtwi-SamEmail author
Chapter
Part of the International Political Economy Series book series (IPES)

Abstract

This chapter critically examines the financial regulations needed to leverage remittances into positive sustainable development outcomes in sub-Saharan Africa. Although remittances have been the fastest growing, most stable, resilient, and reliable source of private capital flows to the region since the 2008 financial crisis, regulations have not kept pace with their increased importance. Noting the context-dependent nature of the remittance-development relationship, the chapter focuses on financial development as a key context. Leveraging remittances into positive development outcomes requires a financial regulatory system that enhances complementarities along the remittance transfer chain. Regulations are needed to expand market access and competition, reduce financial exclusion, facilitate technological innovations in financial services, reduce high transaction costs and informal transfers, enhance accuracy in remittance reporting, and curb illicit financial flows.

Keywords

Remittances Financial regulation Financial development Sub-Saharan Africa Diaspora Migration Sustainable development Technology Private capital flows 

Notes

Acknowledgements

Ted Cohn, Norbert Gaillard, and Anil Hira

References

  1. Acosta, Pablo, Emmanuel Lartey, and Federico Mandelman. 2009. Remittances and the Dutch Disease. Journal of International Economics. 79(1): 102–116.CrossRefGoogle Scholar
  2. Adams, Richard and John Page. 2005. Do International Migration and Remittances Reduce Poverty in Developing Countries? World Development. 33(10): 1645–1669.CrossRefGoogle Scholar
  3. Adenutsi, Deodat E. 2011. Financial Development, International Migrant Remittances and Endogenous Growth in Ghana. Studies in Economics and Finance. 28(1): 68–89.CrossRefGoogle Scholar
  4. African Development Bank. 2010a. Diaspora Bonds and Securitization of Remittances for Africa’s Development. Africa Economic Brief. 1(7): December.Google Scholar
  5. African Development Bank. 2010b. Mobile Banking in Africa: Taking the Bank to the People. Africa Economic Brief. 1(8): December.Google Scholar
  6. African Development Bank. 2012. Diaspora Bonds: Some Lessons for African Countries. Africa Economic Brief. 3(13): December.Google Scholar
  7. African Institute for Remittances (AIR). 2016. Diaspora/Migrant Remittances and the African Institute for Remittances. Potsdam Spring Dialogue 2016. April 7–8, available at http://www.sef-bonn.org/fileadmin/Die_SEF/Veranstaltungen/PFG/2016_pfg_bune_en.pdf
  8. Aggarwal, Reena, Asli Demirguc-Kunt, and Maria Soledad Martinez Peria. 2011. Do Remittances Promote Financial Development? Journal of Development Economics. 96(2): 255–264.CrossRefGoogle Scholar
  9. Anton, José-Ignacio. 2010. The Impact of Remittances on Nutritional Status of Children in Ecuador. International Migration Review. 44(2): 269–299.CrossRefGoogle Scholar
  10. Athanasoulis, Stefano and Eric van Wincoop. 2000. Growth Uncertainty and Risk Sharing. Journal of Monetary Economics. 45(3): 477–505.CrossRefGoogle Scholar
  11. Avendano, Rolando, Norbert Gaillard, and Sebastian Nieto-Parra. 2011. Are Workers’ Remittances Relevant for Credit Rating Agencies? Review of Development Finance. 1(1): 57–78.CrossRefGoogle Scholar
  12. Bank for International Settlements and World Bank. 2007. General Principles for International Remittance Services. January.Google Scholar
  13. Bugamelli, Matteo and Francesco Paterno. 2009. Do Workers’ Remittances Reduce the Probability of Current Account Reversals? World Development. 37(12): 1821–1838.CrossRefGoogle Scholar
  14. Carling, Jorgen. 2004. Emigration, Return and Development in Cape Verde: The Impact of Closing Borders. Population, Space, and Place. 10(2): 113–132.CrossRefGoogle Scholar
  15. Carling, Jorgen. 2014. Scripting Remittances: Making Sense of Money Transfers in Transnational Relationships. International Migration Review. 48(Golden Anniversary Issue): S218–S262.Google Scholar
  16. Chami, Ralph, Connel Fullenkamp, and Samir Jahjah. 2003. Are Immigrant Remittance Flows a Source of Capital for Development? IMF Working Paper No. 03/189.Google Scholar
  17. Chami, Ralph, Adolfo Barajas, Thomas F. Cosimano, Connel Fullenkamp, Michael T. Gapen and Peter J. Montiel. 2008. Macroeconomic Consequences of Remittances. IMF Occasional Paper No. 259.Google Scholar
  18. Chami, Ralph, Dalia S. Hakura, and Peter J. Montiel. 2009. Remittances: An Automatic Output Stabilizer? IMF Working Paper No. 09/91.Google Scholar
  19. De Haas, Hein. 2010. Migration and Development: A Theoretical Perspective. International Migration Review. 44(1): 227–264.CrossRefGoogle Scholar
  20. De Haas, Hein. 2012. The Migration and Development Pendulum: A Critical View on Research and Policy. International Migration. 50(3): 8–25.CrossRefGoogle Scholar
  21. Easterly, William and Ross Levine. 1997. Africa’s Growth Tragedy: Policies and Ethnic Divisions. Quarterly Journal of Economics. 112(4): 1203–1250.CrossRefGoogle Scholar
  22. Economic Commission for Africa (ECA). 2012. Illicit Financial Flows from Africa: Scale and Development Challenges. Background Paper by the High-level Panel on Illicit Financial Flows from Africa.Google Scholar
  23. Economic Commission for Africa (ECA). 2014. Progress Report of the High-level Panel on Illicit Financial Flows from Africa.Google Scholar
  24. Economist (The). 2014. Remittances to Africa: Do the Middlemen Deserve their Cut? April 17, available at http://www.economist.com/blogs/baobab/2014/04/remittances-africa
  25. Financial Action Task Force (FATF). 2012. FATF Recommendations: International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation.Google Scholar
  26. Giuliano, Paola and Marta Ruiz-Arranz. 2009. Remittances, Financial Development, and Growth. Journal of Development Economics. 90(1): 144–152.CrossRefGoogle Scholar
  27. Global Economic Governance. 2016. Consolidating Africa’s Mobile Banking Revolution. Global Economic Governance Program. Oxford: Oxford University.Google Scholar
  28. Global Financial Integrity. 2010. Illicit Financial Flows from Africa: Hidden Resource for Development.Google Scholar
  29. Global Financial Integrity. 2015. Financial Flows and Tax Havens: Combining to Limit the Lives of billions of People.Google Scholar
  30. Gupta, Sanjeev, Catherine A. Pattillo, and Smita Wagh. 2007a. Impact of Remittances on Poverty and Financial Development in Sub-Saharan Africa. IMF Working Paper No. 07/38.Google Scholar
  31. Gupta, Sanjeev, Catherine A. Pattillo, and Smita Wagh. 2007b. Making Remittances Work for Africa. Finance and Development. 44(2).Google Scholar
  32. Hicks, John. 1969. A Theory of Economic History. Oxford: Clarendon Press.Google Scholar
  33. International Fund for Agricultural Development (IFAD). 2009. Sending Money Home to Africa: Remittance Markets, Enabling Environment and Prospects. Rome: IFAD-FAO.Google Scholar
  34. International Fund for Agricultural Development (IFAD). 2016. Remittances at the Post Office in Africa: Serving the Financial Needs of Migrants and their Families in Rural Areas. Rome: IFAD FAO.Google Scholar
  35. International Monetary Fund (IMF). 2009. International Transactions in Remittances: Guide for Compilers and Users. Washington, DC: IMF.Google Scholar
  36. International Monetary Fund (IMF). 2015. Rethinking Financial Deepening: Stability and Growth in Emerging Markets. IMF Staff Discussion Note No. 15/08.Google Scholar
  37. Jowell, Dame Tessa and Dilip Ratha. 2015. It’s Time to Repeal the Remittance ‘Super-Tax’ on Africa. World Bank blog. March 3, available at http://blogs.worldbank.org/peoplemove/it-s-time-repeal-remittances-super-tax-africa
  38. Ketkar, Suhas and Dilip Ratha. 2001. Securitization of Future Flow Receivables: A Useful Tool for Developing Countries. Finance and Development. 38(1).Google Scholar
  39. Kharas, Homi. 2014. Financing for Development: International Financial Flows after 2015. Washington, DC: Brookings Institution.Google Scholar
  40. Levitt, Peggy and Deepak Lamba-Nieves. 2011. Social Remittances Revisited. Journal of Ethnic and Migration Studies. 37(1): 1–22.CrossRefGoogle Scholar
  41. Maimbo, Samuel Munzele. 2004. The Regulation and Supervision of Informal Remittance Systems: Emerging Oversight Strategies. IMF Seminar on Current Developments in Monetary and Financial Law. November 24.Google Scholar
  42. Maimbo, Samuel Munzele and Nikos Passas. 2004. The Regulation and Supervision of Informal Remittance Systems. Small Enterprise Development. 15(1): 53–62.CrossRefGoogle Scholar
  43. Misati, Roseline Nyakerario and Esman Morekwa Nyamongo. 2011. Financial Development and Private Investment in Sub-Saharan Africa. Journal of Economics and Business. 63(2): 139–151.CrossRefGoogle Scholar
  44. Misati, Roseline Nyakerario and Esman Morekwa Nyamongo. 2012. Financial Liberalisation, Financial Fragility and Economic Growth in Sub-Saharan Africa. Journal of Financial Stability. 8(3): 150–160.CrossRefGoogle Scholar
  45. Misati, Roseline Nyakerario, Esman Morekwa Nyamongo, Leonard Kipyegon, and Lydia Ndirangu. 2012. Remittances, Financial Development and Economic Growth in Africa. Journal of Economics and Business. 64(3): 240–260.CrossRefGoogle Scholar
  46. Mohan, Giles and A. B. Zack-Williams. 2002. Globalisation From Below: Conceptualising the Role of the African Diasporas in Africa’s Development. Review of African Political Economy. 29(92): 211–236.CrossRefGoogle Scholar
  47. Mohapatra, Sanket, Dilip Ratha, and Ani Silwal. 2010. Outlook for Remittance Flows 2011–12: Recovery After the Crisis, But Risks Lie Ahead. Migration and Development Brief No.13.Google Scholar
  48. Mohapatra, Sanket and Dilip Ratha. 2011. Remittances Markets in Africa. World Bank, Washington, DC: World Bank, 3–88.Google Scholar
  49. Mundaca, B. Gabriela. 2009. Remittances, Financial Market Development, and Economic Growth: The Case of Latin America and the Caribbean. Review of Development Economics. 13(2): 288–303.CrossRefGoogle Scholar
  50. Overseas Development Institute (ODI). 2014. Lost in Intermediation: How Excessive Charges Undermine the Benefits of Remittances for Africa. London: ODI.Google Scholar
  51. Pallage, Stéphane and Michel A. Robe. 2003. On the Welfare Cost of Economic Fluctuations in Developing Countries. International Economic Review. 44(2): 677–698.CrossRefGoogle Scholar
  52. Portes, Alejandro and Julia Sensenbrenner. 1993. Embeddedness and Immigration: Notes on the Social Determinants of Economic Action. American Journal of Sociology. 98(6): 1320–1350.CrossRefGoogle Scholar
  53. Rahman, Md Mizanur. 2013. Gendering Migrant Remittances: Evidence from Bangladesh and the United Arab Emirates. International Migration. 51(s1): e159–e178.CrossRefGoogle Scholar
  54. Ratha, Dilip. 2007. Leveraging Remittances for Development. Policy Brief. Washington, DC: Migration Policy Institute. June.Google Scholar
  55. Ratha, Dilip, Prabal K. De, and Sanket Mohapatra. 2011. Shadow Sovereign Ratings for Unrated Developing Countries. World Development. 39(3): 295–307.CrossRefGoogle Scholar
  56. Refera, Matewos Kebede, Navkiranjit Kaur Dhaliwal, and Jasmindeep Kaur. 2016. Financial Literacy for Developing Countries in Africa: A Review of Concept, Significance and Research Opportunities. Journal of African Studies and Development. 8(1): 1–12.CrossRefGoogle Scholar
  57. Sachs, Jeffrey and Andrew M. Warner. 1997. Fundamental Sources of Long-Run Growth. American Economic Review. 87(2): 184–188.Google Scholar
  58. Schumpeter, Joseph A. [1911] 1961. The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle. Oxford and New York: Oxford University Press.Google Scholar
  59. Skeldon, Ronald. 2008. International Migration as a Tool in Development Policy: A Passing Phase? Population and Development Review. 34(1): 1–18.CrossRefGoogle Scholar
  60. Sy, Amadou and Fenohasina Maret Rakotondrazaka. 2015. Private Capital Flows, Official Development Assistance, and Remittances to Africa: Who Gets What? Washington, DC: Brookings Institution. May 19.Google Scholar
  61. Terry, Donald F. and Steven R. Wilson (Eds.). 2005. Beyond Small Change: Making Migrant Remittances Count. Washington, DC: Inter-American Development Bank.Google Scholar
  62. United Nations Conference on Trade and Development (UNCTAD). 2011. Impact of Remittances on Poverty in Developing Countries. New York: United Nations.Google Scholar
  63. United Nations Conference on Trade and Development (UNCTAD). 2016. Economic Development in Africa Report 2016: Debt Dynamics and Development Finance in Africa. New York: United Nations.CrossRefGoogle Scholar
  64. Weiss, Martin A. 2016. Remittances: Background Issues for Congress. Washington DC: Congressional Research Service. May 9.Google Scholar
  65. Woodruff, Christopher. 2007. Mexican Microenterprise Investment and Employment: The Role of Remittances. INTAL-ITD Working Paper No. 26. Buenos Aires: Institute for the Integration of Latin America and the Caribbean and Inter-American Development Bank.Google Scholar
  66. World Bank. 2011. Migration and Remittances Factbook 2011. Washington, DC: World Bank.Google Scholar
  67. World Bank. 2014. Migration and Remittances: Recent Developments and Outlook. Migration and Development Brief 22. April.Google Scholar
  68. World Bank. 2015a. Global Economic Prospects. Washington, DC: World Bank.Google Scholar
  69. World Bank. 2015b. Global Financial Development Report 2015–2016: Long-Term Finance. Washington, DC: World Bank.CrossRefGoogle Scholar
  70. World Bank. 2016. Migration and Remittances Factbook 2016. Washington, DC: World Bank.Google Scholar
  71. World Bank. 2017. Migration and Remittances: Recent Developments and Outlook. Migration and Development Brief 27. April.Google Scholar

Copyright information

© The Author(s) 2019

Authors and Affiliations

  1. 1.Department of Political ScienceSimon Fraser UniversityBurnabyCanada

Personalised recommendations