Remittance inflows and economic development in Rwanda

This thesis examines the effects of remittances in development and the intermediate role of institutional and development factors. Specifically, this thesis examines the development impact of remittances in Sub-Saharan African (SSA) countries for the period between 1980 and 2014, with a particular focus on Rwanda. The findings find no significant effect of remittances on economic growth in the SSA region. This seems to imply that the remittance-growth effect plays out differently within the region. Similar findings reveal that on average, the remittance-growth impact is positively influenced by a country’s level of development, financial development and education. Remittances affect economic growth by positively contributing to financial sector development and human capital development in the recipient economy. However, the latter effect is undermined by the quality of institutional variables in the region, such as political instabilities and strict regulations in the region. In the case of Rwanda, however, the findings reveal a positive and significant remittance growth impact in Rwanda. Similar empirical evidence reveals a long-run relationship between remittances and GDP per capita in Rwanda. The long-run causality runs from remittances to GDP per capita, but not vice versa.
Similar findings reveal that on average, remittances significantly affect poverty and contribute to development outcomes by increasing the income available to spend on development outcomes. Findings suggest that the pro-development impact of remittances is greater among poor recipient households. The overall findings argue that the positive and significant remittance-development outcomes are causally conditioned by the prevailing institutional and policy framework.