Remittances and Banking Services: Evidence from Mexico

Authors: Asli Demirgüç-Kunt, J Ernesto López-Córdova, María Soledad Martinez Pería, Christopher Woodruff
Source: The World Bank, December 2007

Despite the rising volume of remittances flowing to developing countries, their impact on the development of banking services in recipient countries has been largely unexplored. We examine this topic using county-level data for Mexico on the fraction of households that receive remittances and measures of both banking breadth (e.g., branches or accounts per capita) and depth (e.g., deposits or credit to GDP). We find that remittances are strongly associated with greater financial depth and breadth. The effects are significant both statistically and economically, even after conducting a number of robustness tests and addressing the potential endogeneity of remittances.

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