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Financial Inclusion and Remittance Services
Using the Global Findex survey data, the various factors that may impact the use of banks and digital channels for remitting money have been explored. The cross-country analysis shows that while many people send/receive remittances in low-income countries, they are still transmitted through informal channels. In India, it is observed that the use of financial institutions/mobiles as remittance channels have improved from 2017 to 2021, especially for the lower-income people. The econometric analysis conducted for both conventional and digital modes of remittance transmission shows that while the banking infrastructure matters for formal remittance transmission, the poorer countries are able to address the problem of lack of adequate infrastructure by using the mobile platform.
The authors thank the two anonymous referees for their valuable comments which helped to improve the paper considerably. Meenakshi Rajeev thanks the RBI and ICSSR for their support to ISEC. The usual disclaimer applies.
Financial inclusion has become a policy priority in most emerging countries, with policymakers and governments acknowledging its various benefits. Financial inclusion allows individuals and households to overcome emergencies, increase investments in productive activities and improve employment opportunities for individuals through increased investment in education and skills (Banerjee and Newman 1993; King and Levine 1993; Schumpeter 1934). In India too, the government has emphasised that all individuals, particularly the weaker sections and lower-income groups, should have access to basic financial services at an affordable cost (Rajan 2009).
The Rangarajan Committee has identified “payments and remittance facilities” as an important component of financial inclusion besides the three basic services: credit, savings, and insurance (Rangarajan 2008). Access to remittance channels is particularly crucial for internal migrant workers, who generally leave their families back home and regularly remit their savings for the upkeep of their families. Remittances from migrants are used to meet various living expenses of a family and are known to reduce poverty and improve overall living standards (Deshingkar 2006a). Considering these benefits, access to safe and reliable formal channels of remitting money is essential.
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