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Saving out of Remittances: Evidence from Ethiopia and Kenya

International Migration

Published online on

Abstract

This article examines the saving behaviour of remittance recipients in Ethiopia and Kenya. The few existing estimates of savings from remittances, often obtained indirectly using expenditure analysis, vary widely. The analysis presented here relies on ordinal saving categories reported in response to a direct survey question. The results reveal that the savings rate is higher in Kenya than Ethiopia, in the raw data and the multivariate model, although in both countries it rises with receipt size. Interestingly, gender is a robust predictor of differential savings, albeit with a contrasting pattern: women save more than men in Ethiopia, while the reverse is true in Kenya. In other results, a pre‐migration agreement about remittances has a strong positive effect on savings. Savings rates are also positively associated with financial inclusion in Ethiopia and formal channel flows in Kenya. Many of these results are confirmed by analysis of broader forms of saving/investment.