Identifying the Effects of Remittances and Bank Presence on Regional Poverty Levels in the Philippines

Abstract

Despite being the third largest remittance-receiving country in the world behind India and China, the Philippines continues to be a developing economy. Are these monetary inflows being utilized effectively then? If not, what are potential mechanisms that can improve their economic and welfare outcomes? To address these questions, this paper will first consider the effect of remittances on poverty levels. Then, we will examine the impact of financial institutions on poverty levels through their interaction with remittances. In an application of the remittances received at the regional level, the regional poverty measures, and regional bank presence, this paper finds reductions in regional poverty gap levels as a result of increases in remittances. With regards to regional bank presence however, this paper finds no significant effect of a growing bank presence on regional poverty levels via remittances.