The role of formal and informal remittances as the determinants of formal and informal finan-cial services




formal financial services, informal financial services, remittance channels, financial inclusion


Research background: The choice of financial services and remittances are important as they influence the livelihood of remittance recipients, who are mostly poor and financially excluded. In literature, extensive evidence suggests a positive impact of the size of remittances on access to financial inclusion and financial development of remittance-recipient countries. However, a concern of such studies is that they might provide a biased outcome as the available data of remittances tend to be formal, whereas informal remittances are difficult to observe. Hence, their evidence might not be applicable in developing countries where remittance transfer via informal channels is very popular.

Purpose of the article: The main objective of this study is to examine the effect of the remittance channel (formal and informal) on the choice of formal, informal financial services of credit and savings of remittance recipients.

Methods: As our dependent variable is a financial service which is a categorical variable (formal and informal), the paper will employ a multinomial logistic regression model to estimate the impact. The data employed in this analysis is from the Finscope survey conducted in Myanmar in 2013 and 2018. Myanmar is the best context for our study, as it is one of a big migrant-sending countries and a developing country whose financial sector is significantly underdeveloped.

Findings & value added: Our findings show that formal remittances promote the use of formal financial services such as credit and savings. However, there is no evidence regarding women recipients` informal channels and formal financial services. Our evidence also suggests there is a need for the government to encourage migrant workers to transform informal remittances into formal ones by removing the barriers of formal remittance channels to promote the use of formal credit and saving among remittance-recipients who are poor and financially excluded.


Download data is not yet available.


Ajefu, J. B., & Ogebe, J. O. (2019). Migrant remittances and financial inclusion among households in Nigeria. Oxford Development Studies, 47(3), 319?335. doi: 10.1080/13600818.2019.1575349.

Al-Srehan, H. S. (2020). The impact of social adjustment policy on Syrian refu-gees. Journal of International Studies, 13(3), 85?97. doi: 10.14254/2071-8330. 2020/13-3/6.

Ambrosius, C., & Cuecuecha, A. (2016). Remittances and the use of formal and informal financial services. World Development, 77, 80?98. doi: 10.1016/j.wor lddev.2015.08.010.

Andersson, K. (2019). Digital diaspora: an overview of the research areas of migration and new media through a narrative literature review. Human Technology, 15(2), 142?180. doi: 10.17011/ht/urn.201906123154.

Anyanwu, J. C., & Erhijakpor, A. E. O. (2010). Do international remittances af-fect poverty in Africa? African Development Review, 22(1), 51?91. doi: 10.1111/j. 1467-8268.2009.00228.x.

Anzoategui, D., Demirgüç-Kunt, A., & Martínez Pería, M. S. (2014). Remittances and financial inclusion: evidence from El Salvador. World Development, 54, 338?349. doi: 10.1016/j.worlddev.2013.10.006.

Bang, J. T., Mitra, A., & Wunnava, P. V. (2016). Do remittances improve income inequality? An instrumental variable quantile analysis of the Kenyan case. Economic Modelling, 58, 394?402. doi: 10.1016/j.econmod.2016.04.004.

Bhattacharya, M., Inekwe, J., & Paramati, S. R. (2018). Remittances and financial development: empirical evidence from heterogeneous panel of countries. Applied Economics, 50(38), 4099?4112. doi: 10.1080/00036846.2018.1441513.

Coulibaly, D. (2015). Remittances and financial development in Sub-Saharan African countries: a system approach. Economic Modelling, 45, 249?258. doi: 10.1016/j.econmod.2014.12.005.

Cristea, L. A, & Grabara, J. (2019). Fiscal impact of the migration phenomenon. Journal of International Studies, 12(4), 144?159. doi:10.14254/2071-8330.201 9/12- 4/10.

Depken, C. A. II, Nikšić Radić, M., & Paleka, H. (2021). Causality between for-eign remittance and economic growth: empirical evidence from Croa-tia. Sustainability, 13, 12201. doi: 10.3390/su132112201.

Freund, C., & Spatafora, N. (2005). Remittances: transaction costs, determinants, and informal flows. World Bank Policy Research Working Papers, September. doi: 10.1596/1813-9450-3704.

Fromentin, V. (2018). Remittances and financial development in Latin America and the Caribbean countries: a dynamic approach. Review of Development Economics, 22(2), 808?826. doi: 10.1111/rode.12368.

Ghauri, S. P., Ahmed, R. R., Vveinhardt, J., Streimikiene, D., & Qureshi, K. S. (2019). The effects of remittances on inflation (Cpi And Wpi) and exchange rate: a case of Pakistan. Romanian Journal of Economic Forecasting, 20(2), 146?165.

Gupta, S., Pattillo, C. A., & Wagh, S. (2009). Effect of remittances on poverty and financial development in Sub-Saharan Africa. World Development, 37(1), 104?115. doi: 10.1016/j.worlddev.2008.05.007.

John, K. (2013). The situation of older persons in Myanmar, HelpAge internation-al. Retrieved from /files/The%20Situation%20of%20Older%20Persons%20in%20Myanmar.pdf.

Jouini, J. (2015). Economic growth and remittances in Tunisia: bi-directional causal links. Journal of Policy Modeling, 37(2), 355?373. doi: 10.1016/j.jpolmod.2 015.01.015.

Jude E., Chrysost B., & Gervasio S. (2019). Do remittances spur economic growth? Evidence from developing countries. Journal of International Trade & Economic Development, 28(4), 391?418. doi: 10.1080/09638199.2019.15685 22.

Kakhkharov, J., & Rohde, N. (2019). Remittances and financial development in transition economies. Empirical Economics, 59, 731?763. doi: 10.1007/s00181 -019-01642-3.

Kosse, A., & Vermeulen, R. (2014). Migrants? choice of remittance channel: do general payment habits play a role? World Development, 62, 213?227. doi: 10.1016/j.worlddev.2014.05.002.

Masron, T., & Subramaniam, Y. (2018). Remittance and poverty in developing countries. International Journal of Development Issues, 17(3), 305?325. doi: 10.1108/IJDI-04-2018-0054.

Meyer, D., & Shera, A. (2016). The impact of remittances on economic growth: an econometric model. Economia, 19(2), 147?155. doi: 10.1016/j.econ.2 016.0 6.001.

Mishchuk, H., Yurchyk, H., & Bilan, Y. (2018). Shadow incomes and real inequality within the framework of leadership and social change. In Leadership for the future sustainable development of business and education (pp. 89?101). Springer, Cham. doi: 10.1007/978-3-319-74216-8_10.

Mishchuk, H., Roshchyk, I. Sułkowska, J., & Vojtovič, S. (2019). Prospects of assessing the impact of external student migration on restoring the country's intellectual potential (case study of Ukraine). Economics & Sociology, 12(3), 209?219. doi: 10.14254/2071-789X.2019/12-3/14.

Mondal, R. K., & Khanam, R. (2018). The impacts of international migrants? remittances on household consumption volatility in developing countries. Economic Analysis and Policy, 59, 171?187. doi: 10.1016/j.eap.2018.07.001.

Munyegera, G. K., & Matsumoto, T. (2016). Mobile money, remittances, and household welfare: panel evidence from rural Uganda. World Development, 79, 127?137. doi: 10.1016/j.worlddev.2015.11.006.

Nyanhete, A. (2017). The role of international mobile remittances in promoting inclusion and development. European Journal of Sustainable Development, 6(2), 256?266. doi: 10.14207/ejsd.2017.v6n2p256.

Oliinyk, O., Bilan Y., Mishchuk, H., Akimov, O., & Vasa, L. (2021). The impact of migration of highly skilled workers on the country?s competitiveness and economic growth. Montenegrin Journal of Economics, 17(3), 7?19. doi: 10.142 54/1800-5845/2021.17-3.1.

Vučković, V., & Škuflić, L. (2021). The effect of emigration on financial and social pension system sustainability in EU new member states: panel data analysis. Economics and Sociology, 14(1), 145?158. doi: 10.14254/2071-789X.202 1/14-1/10.




How to Cite

Virak, K. ., & Bilan, Y. . (2022). The role of formal and informal remittances as the determinants of formal and informal finan-cial services. Equilibrium. Quarterly Journal of Economics and Economic Policy, 17(3), 727–746.