Remittances and financial sector development. Lessons from the Salvadoran case

The paper takes a closer look at the benefits and limitations of “banking” remittances in the case of El Salvador, where state-owned banks followed an active policy of reaching out to the diaspora. The first part analyzes the role of different financial institutions in the Salvadoran remittance market. The second part crosses financial data with remittance data across Salvadoran municipalities. Although coverage of the banking sector is limited to larger municipalities and those with better-than-average socioeconomic indicators, empirical results show that the banking sector is more developed in terms of per capita savings and number of accounts in remittanceintensive municipalities.