Margaret Kaphinde

Over the past few decades, research has established that banking sector development causes economic growth. Consequently, the focus of research is shifting towards explaining factors that determine growth of the banking sector. In the same spirit, this study sought to empirically investigate the impact of remittances on banking sector development in Sub Saharan Africa, over the period 1994 to 2009. Compared to other developing countries, banks in Sub Saharan Africa are not developed. The study was based on a sample of 23 countries from Sub Saharan Africa. It used panel data techniques to analyse the impact of remittances on banking sector development. The data was obtained from World Bank, Africa Development Indicators. Consequently, the study found that remittances are important in explaining banking sector development in Sub Saharan Africa.

 The regression estimates remained consistent under the two proxies of banking sector development, M2 and credit to private sector as percentages of GDP. Based on the findings, the study made recommendations to policy makers in Sub Saharan Africa that they should formulate and implement policies that will enhance the inflow of remittances into the Sub Saharan region. The study also suggested further research on factors that determine the inflow of remittances into an economy.