Are Remittances to Sub-Saharan Africa Altruistic or for Self-Interest? Evidence from Kenya

Abstract

International remittances comprise significant financial inflow for many Sub-Saharan African (SSA) countries and provide considerable disposable income for the receiving households. There has, however, been no consensus on the motivation in the part of sending migrants in which explanations are divided between altruism and self-interest. The study employs Autoregressive Distributed Lag (ARDL) model with co-integration approach to investigate whether international remittances to Kenya can be explained by either altruistic or self-interest motive. We process the World Bank annual data from 1970 to 2010 and find that self-interest, not altruism, as the dominant motivation to determine remittances. The analysis also indicates that demand on housing and exchange rates are the two strong drivers of international remittances to Kenya in both short-run and long-run. The Kenyan government is supposed to facilitate savings from remittances through financial institutions to invest more in the small business sector for economic growth.