Remittances and Financial Inclusion : Evidence from El Salvador

This paper investigates the impact of
remittances on financial inclusion. This is an important
issue given recent studies showing that financial inclusion
can have significant beneficial effects on households. Using
household-level survey data for El Salvador, the authors
examine the impact of remittances on households' use of
savings and credit instruments from formal financial
institutions. They find that although remittances have a
positive impact on financial inclusion by promoting the use
of deposit accounts, they do not have a significant and
robust effect on the demand for and use of credit from
formal institutions. If anything, by relaxing credit
constraints, remittances might reduce the need for external
financing from financial institutions, while at the same
time increasing the demand for savings instruments.