Article

Migrants' Choice of Remittance Channel: Do General Payment Habits Play a Role?

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Abstract

This paper investigates the determinants in migrants’ choice of payment channel when transferring money to relatives abroad. We surveyed 1,680 migrants in the Netherlands, identifying five remittance channels: bank services, money transfer operator (MTO) services, in-cash transfers via informal intermediaries, ATM cash withdrawals abroad and carrying cash when travelling back home. To the best of our knowledge, we are the first to present evidence of the role played by general payment habits: migrants who regularly use internet banking for other purposes are more likely to use bank services for remittances as well. However, we also demonstrate that other important drivers exist in determining the choice of payment channels, such as personal characteristics and country-specific factors, (perceived) costs, ease of use and the availability of remittance options. Based on our findings, we suggest that financial education, cost reduction and new (mobile) remittance solutions may serve a valuable role.

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... In addition to studying the motivations to remit, scholars have started to understand the impact of the characteristics of remittance channels on the amount of financial remittances (e.g., Freund & Spatafora, 2008;Gibson, McKenzie, & Rohorua, 2006;Orozco, 2002;Yang, 2011) and on the choice of the channel (e.g., formal, informal, and personal remittances; e.g., Karafolas & Konteos, 2010;Kosse & Vermeulen, 2014;Siegel & Luecke, 2013). Three sets of channel characteristics have been highlighted as important in this regard: personal incentives (e.g., anonymity/secrecy, cultural familiarity, and personal contact); customer service characteristics (e.g., transparency, dispute resolution, accessibility, language, discrimination, and reliability/versatility); and economic characteristics (e.g., speed, cost, secondary 2 For example, it has been found that household income is negatively related to the amounts of remittances sent by altruistic-motivated immigrants whereas it is negatively related to the amounts of remittances sent by purely self-interested immigrants (i.e., whereas purely altruistic immigrants remit to support families with lower income, purely self-interested immigrants prefer not to remit to families with lower income because they will not directly benefit from the remittance: for example, through future inheritance) (Hagen-Zanker & Siegel, 2007). ...
... benefits, and legal or regulatory aspects; Hernández-Coss, 2005). To date, studies have shown that the cost of financial remittances is the most relevant characteristic in determining the choice of remitting small amounts and through informal channels (e.g., Freund & Spatafora, 2008;Kosse & Vermeulen, 2014;Lerch et al., 2007;Orozco, 2002;Siegel & Luecke, 2013). Migrants instead are encouraged to use formal remittance channels when they prefer other transfer characteristics, such as speed, accessibility, and security (e.g., Karafolas & Konteos, 2010;Kosse & Vermeulen, 2014;Siegel & Luecke, 2013). ...
... To date, studies have shown that the cost of financial remittances is the most relevant characteristic in determining the choice of remitting small amounts and through informal channels (e.g., Freund & Spatafora, 2008;Kosse & Vermeulen, 2014;Lerch et al., 2007;Orozco, 2002;Siegel & Luecke, 2013). Migrants instead are encouraged to use formal remittance channels when they prefer other transfer characteristics, such as speed, accessibility, and security (e.g., Karafolas & Konteos, 2010;Kosse & Vermeulen, 2014;Siegel & Luecke, 2013). ...
Article
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Studies investigating immigrants' remittance behaviours have mainly focused on the determinants and motivations to remit and more recently on the determinants of remittance channel choices. Although these two streams of literature have evolved separately, there is a need for a greater understanding about the linkages between remittance motivations and the preferences towards different characteristics of remittance channels. This paper tackles this issue by presenting an exploratory investigation of the linkages between attributes of remittance channels and personal values behind remittance behaviours. Building on means-end chain theory and applying a laddering technique, this paper highlights how personal values of achievement, power, security, and benevolence are reflected in immigrants' preference for different attributes of remittance channels. Implications for research, policymaking, and business practice with regard to the management and promotion of financial remittances are suggested.
... Informal channels can be unregistered MTOs, who may be a local grocery shop or travel agency in a developing region. Unregistered MTOs have been referred to as "Hundi" or "Hawala", or what we call agents, and use low-cost technologies such as telephones during the transfer process (Kosse and Vermeulen, 2014). Another informal channel is the carrying of cash by friends and families during home country visits. ...
... Formal money transfer channels are encouraged by development organizations, as they have been found to promote economic development, encourage financial liberalization, are low risk with high security and can be efficient and quick (Kosse and Vermeulen, 2014). On the other hand, informal money transfer channels are often perceived as criminal activities where money laundering can occur, high risk where contracts can be reneged or theft can occur but are often cheaper with lower costs incurred by the remitter (Kosse and Vermeulen, 2014;Nawaz et al., 2002). ...
... Formal money transfer channels are encouraged by development organizations, as they have been found to promote economic development, encourage financial liberalization, are low risk with high security and can be efficient and quick (Kosse and Vermeulen, 2014). On the other hand, informal money transfer channels are often perceived as criminal activities where money laundering can occur, high risk where contracts can be reneged or theft can occur but are often cheaper with lower costs incurred by the remitter (Kosse and Vermeulen, 2014;Nawaz et al., 2002). ...
Article
Purpose The purpose of this paper is to investigate how institutional mechanisms operate within both formal and informal channels of cross-border remittance. Design/methodology/approach Face-to-face interviews were conducted with Myanmar migrants mostly working in Thailand. Thematic coding was used to analyze field notes and identify themes in channel member perceptions and institutional environmental process. Findings Informal money transfer channels have achieved higher levels of legitimacy when compared to formal channels. Channel legitimacy is a more important attribute than efficiency. Lack of financial infrastructure, such as bank branches and ATM machines particularly in rural or outlying areas of Myanmar, the requirements for formal documentation and language and communication are the major institutional constraints that encourage the development and use of multiple channels in Myanmar. Formal money transfer channels develop with stronger regulative institutional processes, whereas informal money transfer channels develop with stronger cultural-cognitive and normative institutional processes. Research limitations/implications Using convenience sample of remitters mainly from one area of Thailand and other channel members from Yangon, the financial capital of Myanmar, may limit the applicability of the findings, which calls for future research. Practical implications Banks and money transfer offices need to improve legitimacy perception within migrant communities by building stronger networks with local banks and international banks. They could provide Myanmar speaking front-line service personnel and include brochures in the Myanmar language to improve the communication process. The findings and recommendations from this study are also applicable to informal channels and formal financial institutions in other ASEAN countries that are preparing to make investments in Myanmar. Moreover, Myanmar banks should also consider opening branches to cater for Myanmar workers in ASEAN, especially in Thailand, Singapore and Malaysia. Originality value This paper applies institutional theory within channels, investigates the context of a financial channel rather than a product channel, addresses the importance of institutional environmental mechanisms and constraints in influencing channel behavior and is embedded in the situational context of Myanmar, a newly opened South-East Asian economy where little prior research has been conducted.
... The second most analyzed country is Poland, the sole subject of a work on financial education (Horska et al., 2013), and two studies on the Central and Eastern European region where the relatively low degree of access to full banking services (Burton, 2017;Corrado and Corrado, 2015). Finally, we find three case studies each focused on a different issue: how the debt problems of households relate to socioeconomic and behavioral determinants in Ireland (Russell et al., 2013); the evolution of the presence of banks following socioeconomic segregation in certain neighborhoods in Belgium (Huysentruyt et al., 2013); and lastly, the determinants that condition the migrants' choice of a payment channel for sending remittances in Netherlands (Kosse and Vermeulen, 2014). There is a low number of case studies developed in the EU, although the contribution of EU authors may be considered wider if the authorship of several articles focused on the general dimensions of FI/FE is considered. ...
... To identify these determinants, most of the work on this subject uses mathematical and statistical analysis, and presents a positivist perspective. Some examples are Deku et al. (2016), who look into ethnic and income determinants of consumer credit in the UK; the work of Islam and Simpson (2018), who test which personal and social factors determine the use of fringe financial services in Canada and Bangladesh; and that of Kosse and Vermeulen (2014), who assess the costs, ease of use and availability of the services when selecting a channel for remittances of 501 migrants in the Netherlands. Concerned with the need to increase access to financial products and services, some authors include the perspective of social policies. ...
... There are few studies on remittances in developed countries that take the FI/FE perspective. One of them is a work by Kosse and Vermeulen (2014) whose results reveal the key determinants of the choice of remittance channel are: the remittance amounts, the education of the sender, the costs, the access and the financial development in the home country. For large amounts, bank transfers are preferred whereas informal channels are chosen for smaller ones, cost being a key explanatory variable. ...
Article
Purpose The purpose of this paper is to provide a systematic literature review of the research published on financial inclusion (FI) and financial exclusion (FE) in developed countries using key terms and strict inclusion and exclusion criteria. Design/methodology/approach In total, 52 papers were deemed to be relevant to the analysis. These works were critiqued using a framework that addressed geographical contexts, topics, methodologies and theoretical frameworks. Findings This review highlights the uneven level of development of the academic debate between North America, the UK and continental Europe, and identifies the different theoretical frameworks that construe the body of literature in each region. In addition, the findings show the scant offer of work on the impact that the digital economy has on FE, as well as the reduced number of studies which have focused on certain vulnerable groups and the access to some financial services. Social implications The studies reviewed have not analyzed the specific needs of vulnerable groups while considering the different contexts and pathways to exclusion. The evaluation of solutions and strategies to achieve inclusion is one of the least addressed aspects in the literature. Originality/value The paper synthesizes the main contributions of the top literature on the redefinition of FI/FE in developed countries, the role of fringe services and new determinants of exclusion. The proliferation of studies regarding FI in low- and middle-income countries has generated a great amount of meta-analysis and systematized reviews of asymmetric results. However, no systematized literature review on the broad scope of FI/FE in developed countries has been published in the last decade. This work sheds light over poorly analyzed areas of research that refer to notable social problems.
... First, cross-country studies on remittances' impact on the financial sectorsimilar to other research on remittances that rely on time-series central bank dataare constrained by the quality of macro-data. The level of financial development in the home countries is correlated with the choice of formal transfer channels (Kosse and Vermeulen, 2014). Part of the strong rise in official remittances has been the result of shifting transfers away from unregistered informal channels (friends, families, couriers, others) towards formal transfers (money transfer operators and banks), together with changes in methods in data registration over time (Luna Martinez, 2005; for a discussion of the Mexican case, see Tuir an et al., 2006;Canales, 2008). ...
... A second possible objection to a causal interpretation of the findings is that access to financial services makes receiving remittances easier. The literature does not suggest that a lack of financial access in home countries prevents migrants from sending remittances; only that migrants adapt their sending behaviour and tend to use more informal or cash-based transfer channels when receiving countries have a low level of financial development (Kosse and Vermeulen, 2014). In the case of Mexico, most transfers are cash-based and do not require bank accounts. ...
Article
In policy discussions, it has frequently been claimed that migrants' remittances could function as a ‘catalyst’ for financial access among receiving households. This paper provides empirical evidence on this hypothesis from Mexico, a major receiver of remittances worldwide. Using the Mexican Family Life Survey panel (MxFLS) for 2002 and 2005, the results from the fixed effects logit model show that receiving remittances is strongly correlated with the ownership of savings accounts and to a limited degree with the availability of borrowing options. Effects are particularly important for microfinance institutions, and more important for rural households compared to urban households.
... The security and speed of this transaction is certainly a commodity that is needed and effective enough for the creation of a society without cash, which is a society that uses minimal payment transactions in cash, this is indicated by the increasing number of trading centers and various types of companies that accept non cash payments (Tazkiyyaturrohmah, 2018). Transaction nature is one of the primary considerations in using wallet solutions, Kosse and Vermeulen (2014) have observed that wallet applications are generally used only for small transactions. Mireya (2014) states that the resolution of pricing and transaction costs has an essential role in adopting wallet solutions. ...
... The reason why this hypothesis is supported is because the more positive the nature of the transaction, the customer will adopt electronic money. This hypothesis is supported by previous research (Mantel, 2000;Vila-Ruizb & Mahatanankoona, 2007;Mas, 2011;Kosse & Vermeulen, 2014;Mas & Almazan, 2014;Niranjan et al., 2016). ...
Article
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This study aims to predict the relationship of perceived usefulness, perceived ease of use, relative superiority, nature of transactions, and substitution to adoptions that affect intention to use of smart phone-based electronic money. The variables in this study are relative advantages, transaction nature, perceived usefulness, and perceived ease of use, substitution and adoption of electronic money. Data collection techniques in this study were conducted using a questionnaire with judgmental sampling method. The size of the respondents is 142 respondents. The data obtained is analyzed using Structural Equation Modeling (SEM). The results show that the six hypotheses are supported. The intention to use electronic money is also influenced by the adoption of electronic money. The adoption of electronic money is a significant predictor of intention to use electronic money. This study also provides limitations and suggestions for further research.
... ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online) Vol.7, No.6, 2016 remittance outflow tends to depreciate the domestic currency value which counter-balances the initial stable inflation that the government would have initially like to attain as suggested by a similar study (Termos et al., 2013); it also has an adverse effect on the domestic economy (Alkhathlan, 2013) due to the loss of "wealth of the nation" through capital flight (Brada et al., 2013). The capital flight is a plausible outcome, as there is rising demand to obtain the foreign services mentioned above, and although restrictions have been placed (despite having a free-floating capital mechanism in the country, it is more applicable for corporate), the public may resort to unethical practices such as misusing the "hundi/hawala" financial system, which works as shadow remittance (works for both inflow and outflow) alternative that is operated by financial agents rather than banks, and thus the actual fund transfer of an individual is not reported to the government (Martin, 2009;Kosse & Vermeulen, 2014;Picard & Pieretti, 2011); these said agents may even go as far as to quote more lucrative spot rates rather than what is being offered in the open market, and thus distorting not only the exchange rate market, but also cutting off relevant information from the government or the central bank. ...
Article
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The Double-Edged Blade of Consumerism & the Impossible Trinity – Bangladesh
... ). Recentelijk schatte De Nederlandse Bank dat Nederlandse migranten in totaal zo'n € 8 miljard per jaar naar hun thuisland sturen, veelal zelf ter plekke gepind of gebracht(Kosse & Vermeulen 2013).Ook uit onze gegevens blijkt de populariteit van remittances: ongeveer de helft van alle onderzochte migranten geeft geld en/of goederen aan het land van herkomst. Marokkaanse (63%) en Turkse (58%) Nederlanders geven vaker aan het land van herkomst dan de andere groepen, Antilliaanse Nederlanders (28%) geven het minst vaak. ...
Research
Full-text available
Social citizenship: Giving behavior among migrants. Amsterdam/Utrecht: FORUM Instituut voor Multiculturele Vraagstukken
... They concluded that the factors inf luencing migrant workers to choose these remittance channels include their general payment behaviour and education level, and the costs, convenience, and availability of the channels. 53 As the services provided by those five channels have not satisfied all migrant workers' needs, there is room for new innovative remittance solutions. The Bitcoin system could enter the market and fill the gaps. ...
Article
This paper reviews the possibility of bringing Bitcoin into the mainstream. In so doing, it elaborates the potential and obstacles to the Bitcoin system and what it would take for it to go mainstream. A cross-cutting discussion provides a helicopter view and encompasses the technical, economic, and social, as well as legal, issues at play. The paper focuses particularly on payment systems, and in reviewing the possibility of bringing Bitcoin into the mainstream it takes into consideration lessons that can be learned from existing payment systems.
... ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online) Vol.7, No.6, 2016 remittance outflow tends to depreciate the domestic currency value which counter-balances the initial stable inflation that the government would have initially like to attain as suggested by a similar study (Termos et al., 2013); it also has an adverse effect on the domestic economy (Alkhathlan, 2013) due to the loss of "wealth of the nation" through capital flight (Brada et al., 2013). The capital flight is a plausible outcome, as there is rising demand to obtain the foreign services mentioned above, and although restrictions have been placed (despite having a free-floating capital mechanism in the country, it is more applicable for corporate), the public may resort to unethical practices such as misusing the "hundi/hawala" financial system, which works as shadow remittance (works for both inflow and outflow) alternative that is operated by financial agents rather than banks, and thus the actual fund transfer of an individual is not reported to the government (Martin, 2009;Kosse & Vermeulen, 2014;Picard & Pieretti, 2011); these said agents may even go as far as to quote more lucrative spot rates rather than what is being offered in the open market, and thus distorting not only the exchange rate market, but also cutting off relevant information from the government or the central bank. ...
Article
Full-text available
This paper demonstrates how a change in monetary policy by lowering the interest rates can lead to a decline in savings in the short run. Almost perfect correlation coefficient exists between declined marginal savings and increased household desire to either invest or spend; hoarding proves to be minimal but there are limits to household investments. Corporate investment is also possibly affected by the new policy as consumerism and lower cost of capital encourages the firms to invest. Consumption also leads to indebtedness. However, the consumption patterns, capital flight and borrowing motives proves to be of alarming significance to the policy makers. In the long-run, monetary expansionary policy is forecasted to be ineffective.
... Among several reasons to resort to informal channels, failure of conventional financial infrastructure, their simplicity, efficiency, reliability and low cost (Buencamino & Gorbunov, 2002:13). There can be cultural preferences and language issues playing a role (Kosse & Vermeulen, 2014;Orozco, 2003;Sander, 2004), as well as the immigration status of the sender (Orozco, 2002;Endo et al., 2011). ...
Book
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LITTLE TURKEY IN GREAT BRITAIN by Ibrahim Sirkeci, Tuncay Bilecen, Yakup Costu, Saniye Dedeoglu, M. Rauf Kesici, B. Dilara Seker, Fethiye Tilbe, K. Onur Unutulmaz is about Turkish movers in Britain. Turkish migration to British Isles has a long history but sizeable diaspora communities and enclaves of Turkish origin have emerged only in the last four to five decades. Earlier groups arrived were Cypriots fleeing the troubled island in the Eastern Mediterranean whilst Turks and Kurds of the mainland were not even considering the UK as a destination. This book is about these contemporary movers from Turkey, their movement trajectories, practices, and integration in Britain. Eight researchers from different disciplinary backgrounds and methodological schools came together to do the ground work for the students of this emerging subfield of human mobility studies. Turkey is now at the forefront of accommodating large scale inward mobility mostly due to the crisis in Syria and Iraq. This also brings some attention to Turkey's own diaspora populations.
... They emphasize that remittances respond more to the changes in the macroeconomic conditions of the host country, than to the changes in the macroeconomic conditions of the home country. On the other hand, Kosse and Vermeulen (2014) investigate the determinants in migrants' choice of payment channel when transferring money to relatives abroad. The study shows that education, cost, access, and financial development in the home country are the main determinants, while general cash preferences and internet banking usage play a limited role. ...
Article
Full-text available
This paper aims to investigate the determinant macroeconomic variables and non-economic factors influencing the migrant workers' remittances flow to the Cambodia, Laos, Myanmar, and Vietnam (CLMV) countries. This study employs fixed-effect and random-effect models to analyze the panel data set over the periods of 16 years (2000-2015). The results show that the gross domestic product (GDP) per capita of origin country, the official exchange rate of the home country, and political stability index of home country are significant negative effects on remittances inflow to the CLMV countries. Higher number of migrants to the home country's population increase the remittances inflow to the home countries. Majors of most host country's GDP per capita (Japan, South Korea, and Singapore) are positive effects on the remittances, except for the Thai's GDP per capita. All dummy variables show expected results.
... Thus, we do not consider here the channel through which the remittance is sent (see e.g. Kosse and Vermeulen (2014) and Siegel and Lücke (2013) on this issue) 6 A practical implication of the structure of the game is that migrant agents are aware of the subsequent level of the domestic agents' utilily enabled by their remittances. This can be done either informally or by use of communication devices that allows for information exchange. ...
... The possibility, therefore, cannot be excluded that successful migrants, who have their own businesses, carry out part of their trading activities through hawaladars. Incidentally, however, a recent study reported that migrants who wish to transfer large amounts tend to prefer regular channels (Kosse & Vermeulen, 2013). ...
Article
Full-text available
Hawaladars, like employees from regular financial institutions, can come into contact with criminal money. The important question is: How do they deal with those situations? Regular financial institutions have introduced all manner of due diligence to lessen such risks and comply with anti-money-laundering regulations. However, it is less clear what precautions hawaladars have taken. If they knowingly handle criminal proceeds, they are guilty of money-laundering offences. If they unknowingly handle criminal proceeds, it becomes important to increase their awareness about such possibilities. To make better informed statements about any involvement of hawaladars in the transfer of criminal money, for this article, police files were studied in which hawaladars facilitated criminal clients. This results in two outcomes: First, seven “red flags” regarding transactions involving criminal clients were identified. These are subjective indicators a hawaladar could use to identify criminal transactions. Second, with these red flags in hand, it can be determined whether hawaladars in police files could reasonably be found guilty of money laundering. Ultimately, these results could contribute to identifying the possibilities and impossibilities of formal financial supervision of the hawala sector.
... The CBS determines the ethnic background of a person by the birthplace of his/her parents (6). The most common ethnic backgrounds in the Netherlands were used: Dutch, Turkish, Surinamese, Moroccans, Antilleans/Aruban, Indonesian, West-European and individuals from MOE-countries (66). According to the World Bank, the following countries belong to West-Europe; Austria, Belgium, Denmark, Finland, France, Germany, Greece, Iceland, Italy, Luxemburg, Norway, Portugal, Spain, Sweden, Switzerland and United Kingdom (67). ...
Thesis
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Ethnic background and ethnic segregation are often associated with higher risk of mortality. If in The Hague ethnic background is an important predictor of mortality in different city areas, then it is important to take ethnic background into consideration when designing a neighbourhood-based policy. The objective was to determine whether ethnic background/ethnic segregation can explain the disparities in mortality in different city areas in The Hague.
... Migrants belong to their homelands through the acts of sending remittances to support their families, buying land, making investments, and establishing businesses in the home country (Malešević, 2012). The money that migrants transfer to their countries of origin as remittances, beyond sustaining migrants' household income, represents the surest lifeline for many developing nations that migrants come from (Kosse & Vermeulen, 2014). ...
... This finding is in line with previous research that highlights high transfer charges and refusal of financial institutions to pay remittances in foreign currencies as the reasons why migrants often do not want to use formal financial institutions to send or receive remittances (Teye 2016;Kosse and Vermeulen 2014). The main recipient of migrants remittances in this study are parents (48, 57.1%), children of migrants (24, 28.6%) and other relatives including aunts, sisters, brothers, uncles, nieces, nephews and siblings (12, 14.3%). ...
Article
Remittance is arguably the most uncontroversial variable within the migration-development nexus. Evidently studies on remittances have focused largely on the developmental outcomes of such transfers in the Global South. Drawing on a survey with a cross-section of Ghanaian migrants living in Cambridge, UK, and phone interviews with migrants' families back home, we highlight that the conceptualisation of remittances as unidirectional flows from the Global North to South inadvertently portray families back home as passive actors in remittance flows. Our findings suggest that remittances are part of broader reciprocal social relations, involving material and non-material, bidirectional flows between migrants and their families back home in Ghana. Thus, while migrants continue to send significant financial resources to their families back home, their families also provide to migrants the needed material and non-material resources (e.g. childcare support, sending haircare and other indigenous food and medicinal products, supervision of migrants’ building or businesses investments). This reverse flow of material and non-material resources to migrants, which involves significant and mostly unpaid time and labour costs, are embedded within social relations, which (re)produce reciprocity and relational ties within and across migrants and their families back home. In effect, remittance and reverse remittances serve as a double-edge sword: they can provide avenues for migrants to build and maintain familial, friendship and co-ethnic ties but can also serve to break such ties through competition and conflicts.
... Перспективами потенційних можливостей для використання грошових переказів мігрантів є у першу чергу покращення рівня життя домогосподарств за рахунок додаткових приватних надходжень, а також стимулювання інвестиційного розвитку у зв'язку зі збільшенням доходу та зменшенням граничної схильності до споживання. Kosse and Robert Vermeulen (2014) "Migrants' Choice of Remittance Channel. Do General Payment Habits Play a Role?", ECB Working Paper, № 1683, pp. ...
... In fact, the workforce profile of savings and wealth management services tends to be aligned with the characteristics of the most profitable segment of clients (wealthy, male and white) (Burton, 2018). Thus, banks' culture and marketing may be intimidating for some clients (Salignac et al. 2016), who turn to other nearer providers such as fringe banking businesses (Bowles et al. 2011) and informal remittance intermediaries (Kosse and Vermeulen, 2014). Such bias can more seriously affect vulnerable groups, such as people with mental illness (Harper et al. 2018) or unemployed people, who also experience lack of control or high anxiety that lead them to frustration. ...
Article
The financial exclusion phenomenon has been approached from different perspectives. After reviewing the recent literature, we adopt a financial ecology approach and propose a comprehensive framework to analyse the different types of difficulties (access, use and perception) that vulnerable financial consumers face in relationships with banking institutions as well as their underlying causes. We consider financial inclusion as the sustainable provision of financial services and products and an adjustment to individual needs. We examine a special group of urban vulnerable consumers: underbanked people facing poverty and social exclusion. Data were obtained from focus groups and were coded and analysed using qualitative data analysis software. The results show that use difficulties predominate, followed by perception difficulties. Bank pressure and lack of financial training stood out among the main causes of these financial difficulties. We conclude that poorer neighbourhoods constitute a distinctive financial ecology produced by the ‘discrimination’ of a significant number of their inhabitants in the use of mainstream financial services. The study provides evidence of the socio-spatial nature of the exclusion process and calls for further research on the role of policy responses to restrict abusive practices.
... Using survey data for the Netherlands, Kosse and Vermeulen (2014) shed light on what determines whether migrants use formal or informal channels. The results they obtained suggest that general payment behaviour (e.g. the frequency of using internet banking for other purposes), education, the remittance amount, the perceived costs of different channels and the availability of remittance options have an impact on the decision to use cash instead of formal channels for remittances. ...
... For regulators, informal channels present challenges associated with criminal activities such as money laundering, the financing of terrorism and smuggling. On the other hand, formal channels have more potential for promoting economic development by improving the earnings of the domestic financial sector and by increasing resources to finance economic activities (Kosse & Vermeulen, 2013). ...
Research
The Impact of Migration and Migrant Remittances on Household Poverty in Bangladesh.
Article
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The rising number of foreign workers in Italy during the last 15 years has led to a conspicuous increase in the amount of remittances sent abroad. In this paper, we examine the determinants of remittance outflows originated in Italy and transferred abroad through registered financial intermediaries. After controlling for a wide set of socioeconomic regressors, we document a strong positive relation between remittances and the cost of travel between Italy and the migrants' respective home countries. We interpret this result as indirect evidence of unrecorded flows, since the relation between remittances and travel cost should be non‐significant unless geographical proximity permits remitters to switch to informal (non‐observable) transmission mechanisms. Moreover, using data on temporal and monetary costs for a subset of bilateral corridors, we also find remittances to be negatively correlated with high transaction costs and low speed of transfer. We rely on this empirical evidence and on a model of migrants' remitting behavior to present new strategies for estimating the size of the informal outflow.
Thesis
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The increasing pace of globalization over the past three decades has contributed immensely to global interconnectedness and interrelationships resulting in transnational movement of people across countries in different parts of the World. One of the concomitants of these movements is the enormous flow of remittances especially from transnational migrants in the destination countries to their countries of origin, resulting in a growing interest of researchers and development practitioners on the impact/effects these flows may have on development in the countries of origin. Thus, this study was focused on investigating the effects these remittances have on households and family members in Benin City, South-South of Nigeria. The study adopted a mixed methods research which involved the collection of empirical data from both qualitative and quantitative sources. Firstly, questionnaire was administered to a sample of 120 households each from Remittances Receiving Households and Non-Remittances Receiving Households in Benin City. This was to allow for comparison of the social development indicators and general wellbeing of both Households. Secondly, interview was conducted on 20 selected transnational migrants of Benin City origin resident in Germany. The quantitative data was analyzed using the Statistical Package for Social Sciences (SPSS version 22). Thereafter, descriptive statistics such as frequency tables, graphs and contingency tables were used to present the results. The qualitative data was analyzed using Wolcot`s (1994) three models of analysis which are: description, analysis and interpretation. The findings of the study revealed that Remittances Receiving Households had better improvements in key social development indicators. The findings also revealed that a combination of altruistic and self-interest factors determines remittances flow to Benin City. The study also made some recommendations for policy and future research.
Article
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This paper first explores the role of digital financial services, e.g. mobile money systems and cryptocurrency-based systems, and their impact on the choice of migrants to send remittances. Secondly we discuss whether alternative remittances sending channels increase access to financial services for remittance-sending and remittance-receiving households. Africa, and in particularly Kenya, are pioneers in alternative money transfer systems and of tailor-made regulatory initiatives to address digital financial services. Thus, our paper focuses on the technologies of the Kenyan mobile money system, M-Pesa, and the major cryptocurrency, Bitcoin, and based on that takes into account selected experiences of other Sub-Saharan African countries. We find that in comparison to traditional remittances sending channels, mobile money transfer channels are often superior in terms of service-related features as costs of transfers for sending and receiving households, speed of delivery, availability and access to the remittances by receiving households or security of transactions. More importantly, mobile cash systems can fulfil the SDG goal of the 3 per cent fee more than 10 years earlier than envisaged in 2030. On the other side, the choice to use a specific transfer channel might be restricted by the lack of physical and technological availability of providers and means, and technological illiteracy. In addition, sending and receiving households might be cautious to use mobile cash systems due to a lack of trust in the system, the providers or regulatory authorities. Accordingly, financial inclusion beyond e-payments and outreach to the poor is not an automatism. In contrast, the use of Bitcoin-based transfer systems is more ambivalent; these systems are technically more challenging both in terms of infrastructure and literacy and more vulnerable to fraud. Some findings also indicate that Bitcoin is an incomplete and inferior substitute to which migrants refer to if their first option is not available or suffers from severe deficiencies. Future research also needs to differentiate sending and receiving households stronger according to personal features in order to deepen our understanding about the choices of and restrictions of vulnerable groups who would benefit the most from using mobile cash systems.
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본 연구는 한국 내 방글라데시 이주민들의 인구사회학적 특성, 결속적 네트워크 와 모국에 대한 초국적 소속감을 고찰해 보았다. 한국 내 방글라데시 이주민들의 인구사회학적 특성으로서는 연령, 한국 거주 기간, 성별, 결혼 여부, 종교, 학력, 현 재 직업, 거주 자격, 방글라데시 직업, 이주 이유, 거주지, 사회적 네트워크로서는 결속형 사회적 네트워크, 교량형 사회적 네트워크, 연결형 네트워크 사회적 네트워 크, 초국적 소속감으로서는 초국적 자전적 소속감, 문화적 소속감, 경제적 소속감, 법적 소속감이 조사되었다. 2016년 기준, 한국 내에는 15,429명의 방글라데시 이 주민이 거주하고 있으며, 본 연구는 이 중 310명을 대상으로 설문조사를 수행하였 다. 본 연구에서 확인된 바는 다음과 같다: 한국 내 방글라데시 이주민들의 사회적 네트워크 중 결속형 사회적 네트워크는 기존 연구에서 나타난 이주민들의 결속형 사회적 네트워크 개념과 대립하는 높은 유대관계를 보여주었다. 결속형(관계) 및 결 속형(도움) 사회적 네트워크의 수준도 유의미한 차이를 보였다. 결속형 사회적 네트 워크의 유대관계는 이주민들이 가지고 있는 연고나 연줄에 따라 달라졌다. 유대관 계의 수준은 대상에 따라서도 달라졌다. 한국 내 방글라데시 이주민들의 교량형(관 계) 사회적 네트워크는 기존 이주민들의 교량형 사회적 네트워크의 개념과 부합하 - vii - 는 높은 유대관계를 보여주었지만 교량형(도움) 사회적 네트워크는 이에 부합하지 않는 낮은 유대관계를 보여주었다. 교량형 사회적 네트워크의 유대관계는 이주민들 이 가지고 있는 연고나 연줄에 따라서도 달라졌다. 유대관계의 수준 역시 대상에 따라 달라졌다. 만약 유대관계가 사회적 네트워크를 규정하는 특징이라면, 일반적인 대상과 결속 및 교량형 사회적 네트워크에서 이주민들의 대상이 같지 않다고 얘기 할 수 있을 것이다. 한국 내 방글라데시 이주민들의 연결형 사회적 네트워크는 활 발하게 기능하고 있고 이주민들은 다양한 기관 및 단체들과 관계하고 있다. 한국 내 이주민들의 초국적 자전적 소속감, 초국적 문화적 소속감, 초국적 경제적 소속감 와 초국적 법적 소속감은 높다. 이주민들은 모국에 대해 강한 애정과 연계 를 갖고 있다. 이들은 모국에 대해 정서적인 애착과 충성심을 유지하고 싶어 한다. 이 연구는 한국 내 방글라데시 이주민들의 초국적 문화적 소속감을 문화적(고유) 소속감와 초국적 문화적(엔터테인먼트) 소속감으로, 초국적 경제적 소속감은 경제적 (생계) 소속감와 초국적 경제적(금전) 소속감으로, 초국적 법적 소속감은 법적(심리 적) 소속감와 초국적 법적(안전과 안보) 소속감으로 구분하였다. 초국적 문화적 소 속감 종류의 소속은 일반적으로 높게 나타났지만 서로 간의 측도를 살펴볼 때는 초 국적 문화적(고유) 소속감은 초국적 문화적(엔터테인먼트) 소속감보다 높게 나타났 다. 초국적 경제적 소속감은 연구 결과에 따라 상당히 강하게 나타났지만 상대적 측도는 초국적 경제적(생계) 소속감이 초국적 경제적(금전) 소속감보다 높게 나타났 다. 초국적 법적 소속감은 높게 나타났다. 그러나 초국적 법적(심리적) 소속감은 초 국적 법적(안전과 안보) 소속감보다 상대적으로 높게 나타났다. 방글라데시 이주민의 사회적 네트워크에 대한 인구사회학적 특징을 종합한 결과 연령, 결혼 여부, 현재 직업, 거주 자격(비자), 방글라데시 직업, 이주이유 및 거주 지에 따라 사회적 네트워크의 차이가 있는 것으로 나타났다. 방글라데시 이주민의 사회적 네트워크와 초국적 소속감에 대한 인구사회학적 특징을 종합한 결과, 연령, 결혼 여부, 현재 직업, 거주 자격(비자), 방글라데시 직업, 이주이유 및 거주지에 따 라 사회적 네트워크와 초국적 소속감의 차이가 있는 것으로 나타났다. 방글라데시 이주민의 사회적 네트워크와 초국적 소속감에 대한 인구사회학적 특징을 종합한 결 과 한국 거주 기간과 학력 따라 사회적 네트워크와 초국적 소속감의 차이가 없는 것으로 나타났다. - viii - 결속형(관계) 사회적 네트워크는 한국 내 방글라데시 이주민들의 모국에 대한 초 국적 자전적 소속감, 초국적 문화적(고유) 소속감, 초국적 문화적(엔터테인먼트) 소 속감, 초국적 법적(심리적) 소속감, 초국적 법적(안전과 안보) 소속감에 긍정적인 영 향을 미치고 있다. 또한 결속형(도움) 사회적 네트워크는 한국 내 방글라데시 이주 민들의 모국에 대한 초국적 문화적(엔터테인먼트) 소속감, 초국적 경제적(생계) 소 속감, 초국적 경제적(금전) 소속감에도 긍정적인 영향을 미치고 있다. 교량형(관계) 사회적 네트워크는 한국 내 방글라데시 이주민들의 모국에 대한 초국적 자전적 소 속감, 초국적 문화적(고유) 소속감, 초국적 법적(심리적) 소속감에 긍정적인 영향을 미치고 있으며, 교량형(도움) 사회적 네트워크는 초국적 문화적(고유) 소속감에 부 정적인 영향을 미치고 있다. 연결형 사회적 네트워크는 한국 내 방글라데시 이주민 들의 모국에 대한 초국적 자전적 소속감, 초국적 문화적(엔터테인먼트) 소속감, 초 국적 경제적(생계) 소속감, 초국적 경제적(금전) 소속감, 초국적 법적(안전과 안보) 소속감에 양의 영향을 보이고 있다. 사회적 네트워크 중 결속형(관계) 사회적 네트 워크하고 연결형 사회적 네트워크는 다른 사회적 네트워크보다 초국적 소속감에 더 많은 양의 영향을 끼치고 있다. 본 연구 결과에서 나타난 방글라데시 이주민의 사회적 네트워크와 초국적 소속감 의 특징은 한국정부와 NGO의 이주민 지원 제도 및 정책의 보완과 발전방안에 유 의미한 경험적 자료가 될 수 있을 것이다. 한국 내 현존하는 이주민을 위한 다양한 제도적 지원과 우호적인 정책들이 현장에서 좀 더 효율적으로 실행될 수 있는 방안 을 모색할 필요가 있다. 이외에도, 한국을 의미 있는 다문화 사회로 만들기 위해서 는 주류 사회에 이주민들의 통합을 가로막는 장벽들을 극복하는 방안을 찾아야 할 것이다. The purpose of this study is to examine the socio-demographic characteristics, social network and transnational belonging of Bangladeshi migrants in Korea. The socio-demographic characteristics is examined according to age, length of stay in Korea, gender, marital status, religion, education, present occupation, visa status, occupation in Bangladesh, reason for migration, and living area. Social network is examined according to bonding social network, bridging social network, and linking social network. Transnational belonging at homeland is examined according to transnational auto-biographical belonging, cultural belonging, economic belonging, and law belonging. The total Bangladeshi migrants who live in Korea is 15429 and survey is conducted of 310 migrants. The findings of this study are as follows: bonding social network of Bangladeshi migrants in Korea refers strong ties that does not support the concept of migrants’ bonding social network. The level of bonding (relational) social network and bonding (help) social network are not same. The ties of bonding social network depend on what kinds of relation or - 151 - connection they have. The level of ties depends on the subjects with whom they make tie. Bridging (relational) social network of Bangladeshi migrants in Korea refers strong ties that supports the concept of migrants’ bridging social network but bridging (help) social network of Bangladeshi migrants in Korea refers weak ties that does not support the concept of migrants’ bridging social network. The ties of bridging social network depend on what kinds of relation or connection they have. The level of ties depends on the subjects with whom they make tie. If tie is the parameter of social network, then we can say that the general subjects and the subjects of migrants’ bonding and bridging social network are not same. The linking social network of Bangladeshi migrants in Korea is active and migrants engage in various organizations. Transnational auto-biographical belonging, cultural belonging, economic belonging, and law belonging of migrants in Korea are strong. Migrants have strong feeling and connection at homeland. They wish to maintain emotional attachment and loyalty at home land. This study devides transnational cultural belonging of Bangladeshi migrants in Korea into cultural originality belonging and cultural entertainment belonging, transnational economic belonging of Bangladeshi migrants in Korea into economic livelihood belonging and economic financial belonging, and law belong of Bangladeshi migrants in Korea into transnational law psychological belonging and law safety and security belonging. Although both transnational cultural belongings are strong but cultural originality belonging is more strong than cultural entertainment belonging; both economic belongings are strong but economic livelihood belonging is more strong than economic financial belonging; and both transnational legal belongings are strong but legal psychological belonging is more strong than law safety and security belonging. - 152 - There are differences in social network and transnational belonging of Bangladeshi migrants in Korea in terms of socio-demographical characteristics of Bangladeshi migrants. Among the socio-demographical characteristics of Bangladeshi migrants in Korea, age, marital status, present occupation, visa status, occupation in Bangladesh, reason for migration, and living area have significant differences in social network and transnational belonging. But there are no deferences in social network and transnational beloning of Bangladeshi migrants in Korea in terms of duration in Korea and education. Bonding relational social network has significant positive impact on transnational auto-biographical belonging, cultural originality belonging, cultural entertainment belonging, law psychological belonging, and law safety and security belonging at homeland of Bangladeshi migrants in Korea. Bonding help social network has significant positive impact on transnational cultural entertainment belonging, economic livelihood belonging, and economic financial belonging at homeland of Bangladeshi migrants in Korea. Bridging relational social network has positive impact on transnational auto-biographical belonging, cultural originality belonging, and legal psychological belonging but bridging help social network has negative impact on transnational cultural originality belonging at homeland of Bangladeshi migrants in Korea. Linking social network has positive impact on transnational auto-biographical belonging, cultural entertainment belonging, economic livelihood belonging, economic financial belonging, and legal safety and security belonging at homeland of Bangladeshi migrants in Korea. Among social networks, bonding relational social network and linking social network have more positive relation with various transnational belongings than other social networks. This study suggests that the lack of institutional policies and implementations taken by Korean government and NGOs to attract migrants - 153 - in Korea need to find out. The authorities should not only take migrants’ friendly policies but also need to implement successfully. Besides, migrants’ barriers to integrate in mainstream society have to find out and overcome to make a meaningful multicultural society in Korea. It also suggests that migrants’ belonging should have not only at homeland but also in host land as parallel way as if both countries can be benefited by transnational migrants. Key Word: International migration, Social Network, Transnational Belonging, Bangladeshi Migrant, Korea, Bangladesh
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Thousands of fleeing workers in the aftermath of the Iraqi invasion of Kuwait revealed that they had kept large savings in Iraq and Kuwait that were never remitted to their home countries. Among the seriously affected countries, Egypt was estimated to have lost about $2 billion in remittances during 1990 due to the war, plus another $13 billion said to have been accumulated savings of Egyptian workers in Kuwait. These unremitted savings in Kuwait alone were equal to 46% of the officially recorded remittances to Egypt during 1980-89. Had adequate policies been in place, a large part of these savings may well have been transferred to Egypt, providing it with much-needed foreign exchange. This article, based on a study covering remittances over 1974-89, examines the Egyptian case against the backdrop of the growth of remittances to countries in the Middle East and a theoretical framework for analysis of such flows. It then draws policy lessons from this experience. -from Author
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Migrant remittances, particularly when transferred through the banking system, may contribute to financial development in migrants' home countries. We analyse the determinants of the choice of transfer channel (formal services versus informal operators or personal transfers) by Moldovan migrants in 2006. We estimate a multinomial logit model from household survey data. Our explanatory variables include socio‐economic characteristics of the migrant and other household members, the pattern of migration (destination country, legal status, duration), and financial information (average amount and frequency of payments). Key reasons not to use a formal transfer channel are a migrant's emphasis on low transfer cost (rather than speed, convenience or security), irregular legal status in the host country, and short migration spells. Our findings demonstrate that migrants' transnational capacities and activities in their entirety bear upon the choice of transfer channel; any policy interventions to promote the use of formal channels should reflect this.
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Is having a foreign background a relevant factor in choosing between payment instruments in consumer point-of-sale transactions after migration? We analyze this question using a unique diary survey in which both participants with a Dutch and a foreign background documented their daily purchases. We present several pieces of evidence suggesting that foreign backgrounds still influence the choice between payment instruments after migration to the Netherlands. For instance, we find that first-generation migrants from a number of countries that can be seen as cash-oriented are more likely to use cash in the Netherlands. At the same time, second-generation migrants have similar payment habits as individuals with a Dutch background. This finding suggests that payment behavior is not passed on between generations, but affected by host country payment habits. Finally, we suggest that, in this context, special information campaigns to increase debit card usage will not have clear net social benefits.
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Using a recent Spanish database, we show that remittances respond to cross country differences in portfolio values. This behavior suggests that immigrants are sophisticated economic optimizers who take advantage of opportunities to invest trans-nationally given the networks that immigrants are likely to have developed both in their host and home communities. The responsiveness to portfolio variables persists whether immigrants are highly or less highly educated. However, there are differences in the individual portfolio variables to which immigrants from various regions of the world respond to, as we would expect given migrants' diverse backgrounds and motives for emigrating. Additionally, remitting patterns change over time with the length of the migration spell, suggesting that remittances sent for portfolio motives become more likely as the immediate needs of family left back home are addressed and immigrants settle down in their host communities.
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In maturing microfinance markets where there is increasing competition, the possibility of being able to offer an additional financial product, such as money transfer services, is particularly attractive. This article looks at migrant remittances to and in Sub-Saharan Africa and the link with the microfinance industry as a provider of money transfer or ancillary financial services to remitters and receivers. It demonstrates with case studies what transfer services microfinance institutions (MFIs) currently do or could provide and discusses the opportunities and challenges of such serces for MFIs. Most small MFIs that are not licensed financial institutions will find it difficult to offer money transfer services, partly because of their lack of capacity and partly because they will not be granted central bank permission. However, by collaborating with specialized forex services MFIs can sometimes act as agencies, dealing only in local currency, or they may specialize in domestic transfers.
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In contrast to earlier predictions, migrant remittances from Europe to Morocco have shown an increasing trend over the past decades. Remittances constitute a vital and relatively stable source of foreign capital. The so-called “euro effect” and concomitant money laundering can only explain part of the recent, extreme surge in remittances. The structural solidity of remittances is explained by the unforeseen persistence of migration to northwestern Europe; new labor migration toward southern Europe; and the durability of transnational and transgenerational links between migrants and stay-behinds. The stable economic-political environment and new “enlightened” policies toward migrants explain why Morocco has been relatively successful in channeling remittances through official channels.
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Despite the importance of remittances to developing countries, their impact on banking sector breadth and depth in recipient countries has been largely unexplored. We examine this topic using municipality-level data on the fraction of households receiving remittances and on measures of banking breadth and depth for Mexico. We find that remittances are strongly associated with greater banking breadth and depth, increasing the number of branches and accounts per capita and the amount of deposits to GDP. These effects are significant both statistically and economically, and are robust to the potential endogeneity of remittances, inclusion of a wide range of controls and even municipal fixed effects specifications using an alternative panel data set from a sample of municipalities.
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Using data for El Salvador and Bayesian techniques, we develop and estimate a two-sector dynamic stochastic general equilibrium model to analyze the effects of remittances on emerging market economies. We find that, whether altruistically motivated or otherwise, an increase in remittance flows leads to a decline in labor supply and an increase in consumption demand that is biased toward non-tradables. The higher non-tradable prices serve as incentive for an expansion of that sector, culminating in reallocation of labor away from the tradable sector -- a phenomenon known as the Dutch disease. Quantitative results also indicate that remittances improve the welfare of households because they smooth income flows and increase consumption and leisure levels. A BVAR analysis provides results that are consistent with the dynamics of the model.
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Remittances—the portion of international migrant workers' earnings sent back from the country of employment to the country of origin—have come to play a central role in the economies of labor-sending countries. Recent research has tended to focus on enumerating the costs and benefits of remittances. This paper proposes an alternative perspective and delineates the “Remittances System” as a heuristic to clarify intermediate relationships between determinants and effects of remittances. Using the heuristic as a framework for review of recent literature concerning remittances, the paper identifies gaps in currently available research and argues for greater focus upon the social and political consequences of remittance flows.
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Workers' remittances to developing countries have become the second largest type of flows after foreign direct investment. This paper uses data on remittance flows to 109 developing countries during 1975–2007 to study the link between remittances and financial sector development. In particular, we examine the association between remittances and the aggregate level of deposits and credit intermediated by the local banking sector. This is an important question considering the extensive literature that has documented the growth-enhancing and poverty-reducing effects of financial development. We provide evidence of a positive, significant, and robust link between remittances and financial development in developing countries.
Article
Remittances have greatly increased during recent years, becoming an important and reliable source of funds for many developing countries. Therefore, there is a strong incentive for receiving countries to attract more remittances, especially through formal channels that turn to be either less expensive or less risky. One way of doing so is to increase their financial openness, but this policy option might generate additional costs in terms of macroeconomic volatility. In this paper we investigate the link between remittance receipts and financial openness. We develop a small model and statistically test for the existence of such a relationship with a sample of 66 mostly developing countries from 1980-2005. Empirically we use a dynamic generalized ordered logit model to deal with the categorical nature of the financial openness policy. We apply a two-step method akin to two stage least squares to deal with the endogeneity of remittances and potential measurement errors. We find a strong positive statistical and economic effect of remittances on financial openness.
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Interest on the factors shaping migrants’ use of a given money transmittal method has recently intensified following researchers agreement on the often inadequate infrastructure surrounding remittances transfers. This concern has also captured the attention of government officials, who appear more eager to promote more efficient and safe transfers of emigrant’s earnings given the potential that remittances hold for increasing resources at the disposal of receiving nations. This paper uses data from mexican immigrants who have resided in the United States to examine the various factors that shape migrants’ use of the various methods to remit earnings to Mexico. The analysis reveals that accessibility factors and migrants’ awareness of alternative remitting methods play a key role in explaining their use of the various money transfer mechanisms.