The Impact of Diaspora Remittances on Kenya’s Economic Development: An Analysis of Growth, Poverty Reduction, and Financial Inclusion
DOI:
https://doi.org/10.47604/ijecon.3731Keywords:
Remittances, GDP Growth, Poverty, Financial Inclusion, Inflation, Exchange Rate, Socio-economic DevelopmentAbstract
Purpose: This study examined the Impact of Diaspora Remittances on Kenya’s Economic Development: An Analysis of Growth, Poverty Reduction, and Financial Inclusion in Kenya over the period 2000 to 2025. The analysis focused on how external inflows and key economic variables influence GDP growth, poverty reduction, and financial inclusion.
Methodology: Using annual time series data, the study employed descriptive statistics, unit root tests, and multiple regression models to establish both the stationarity properties of the variables and the nature of their relationships.
Findings: The results reveal that remittances have a positive but statistically insignificant effect on GDP growth and financial inclusion, suggesting that their impact on overall economic performance remains modest when not channeled into productive investment. Foreign direct investment also shows a positive yet insignificant relationship with growth, while official development assistance exhibits a significant negative effect, indicating inefficiencies in the use of aid resources. Inflation rate has a negative and statistically significant influence on both GDP growth and financial inclusion, confirming that macroeconomic instability constrains development outcomes. Conversely, exchange rate stability positively affects financial inclusion, implying that stable currency conditions encourage financial participation. The findings further show that access to health facilities significantly reduces poverty levels, whereas school enrolment has an indirect but positive effect on human development.
Unique Contribution to Theory, Practice and Policy: Overall, the study concludes that while Kenya has achieved progress in expanding financial inclusion and improving social indicators, sustained economic growth and poverty reduction require stable macroeconomic conditions, productive utilization of remittances and aid, and strengthened investment in health and education sectors.
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