Remittance flows and banking sector development in emerging markets: Do institutions matter?

The majority of the existing literature has explicitly stated the positive effect of remittances on the development of the banking sector in an evolving market. Nevertheless, very little is known when an institution is taking into account the link between remittance flows and banking sector development. In this paper, the study draws data from 34 emerging economies within the SSA and employs a panel EGLS approach. We confirm a negative effect of remittance flows on banking sector development in the region. Besides, we also confirm that institutions affect banking sector development positively in the region. We recommend the need to develop and strengthen institutions to reduce the informal transfer of remittance in the region. Likewise, enhancing institutional infrastructure would boost the development of the banking sector. [ABSTRACT FROM AUTHOR]