Governance Mediates the Effect of Remittances on Financial Inclusion in Sub-Saharan Africa

This paper empirically investigates the effect of remittances on financial inclusion and how governance modulates the incidence of remittances on financial inclusion in 29 Sub Saharan African countries for the period 2004-2018. A financial inclusion index and four governance dimensions are adopted for this study, namely, political, economic, institutional and total governance. The empirical evidence is based on the generalized method of moments. The following findings are established. Remittances have either positive, negative or no significant effects on financial inclusion. From the interactive regressions, three major tendencies are apparent. First, remittances dynamics consistently have an unconditional positive, negative or no effect on financial inclusion. Second, political governance and total governance dynamics modulate the remittances dynamics to broadly induce a negative net effect on financial inclusion. Third, policy thresholds at which the modulating variables reverse the net effect on financial inclusion from negative to positive are 0.7757 political governance and 0.82163 total governance. The computed thresholds make economic sense because they are within statistical range. Theoretical and policy implications are discussed.