Remittances And Sustainable Development In Sub Saharan Africa: The Moderating Role Of Financial Development

Abstract

Sub-Saharan Africa which is comprised of developing countries that hold great prospects for sustainable development and remittances remain a viable source of financing its attainment. Financial intermediation is inevitable in facilitating this goal in line with achieving SDGs in the region.  This paper examines the moderating role played by financial sector development in the dynamic nexus between remittances and sustainable development in 30 Sub-Saharan African countries using panel data covering the period 2000–2022. The study is premised on the two-gap model theory which emphasises resource mobilisation through remittances to bridge the savings gap and foreign exchange gap for sustainable development and this guides the study’s analysis and recommendations. It contributes to current development literature by offering long-run panel data evidence on the moderating role of financial development in the remittances-sustainable development nexus in Africa. The study employed SYS-GMM and two-step dynamic GMM techniques to address the issue of endogeneity. The findings showed that there is a significant positive correlation between the interactive term of remittances and financial development with respect to sustainable development in Sub-Saharan Africa. The study concluded that in the 30 Sub-Saharan African nations, financial development and remittances act as complements to sustainable development. Accordingly, the study recommends strengthening financial institutions as  a sound financial system reduces the cost of sending remittances which aligned with SDG 10.c that seeks to reduce transaction costs in sending remittances.