M-payment use and remittances in developing countries: a theoretical analysis

Description

Many developing countries are characterized by high levels of remittances and low levels of financial inclusion. In this context, introduction of M-payment services can be seen as a means of improving both financial inclusion and remittance levels. To our knowledge, M-payments and remittances so far have been studied separately; in this paper, we investigate their interplay by analyzing how domestic use of M-payment services alters individual remittance decisions, and thus impact on aggregate remittance flows and welfare. We consider a theoretical model which accounts for both the decision to send a remittanceand the remittance receivers' use of that remittance. We find that M-payment use has a positive effect on aggregate remittanceflows and also a favorable impact on welfare. However, we find that once introduced, the price of M-payment services can have unpredictable effects.

Abstract

International audience

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