Influence of diaspora remittances on financial development in Kenya

Abstract

Diaspora remittances have remained substantial and have been seen to increase globally. The same have been seen to be an enabler for growth of most developing economies. In 2015 they were estimated to be more than $601billion and developing countries were estimated to have received $441 billion nearly three times that of Official Development Assistant. In Kenya, remittances have maintained an average growth of$100 million from January 2013. Therefore, the study sought to examine the influence of Diaspora remittances on financial development in Kenya with specific objectives being to determine influence of Diaspora remittances on credit to private sector, establish the influence of Diaspora remittances on access to financial services and examine the influence of Diaspora remittances on bank deposits. The study adopted purely secondary data through literature reviews while utilizing panel data for 2004-2015 as 2016 data was unavailable. In order to fulfill the above, a general linear model was adopted. The results extracted from the analysis revealed that Diaspora remittances do not have a significant influence on credit given to private sector, Diaspora remittances do not have a significant influence on access to financial services and Diaspora remittances have no significant influence on bank deposits. In conclusion therefore, the main finding of the study was that Diaspora remittances had no significant influence on financial development in Kenya and Diaspora remittances do not necessarily determine the direction financial development in Kenya takes in terms of credit extended to private sector, access to financial services and bank deposits thus prior values of Diaspora remittances may not be used to predict future values of financial development.