Case Study

Hand Out or Hand Up: Microfinance, Remittances, and Entrepreneurship in Nicaragua

Establishing a link between remittances and financial services provision
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This technical brief explores the role that MFIs can play in creating or strengthening the link between remittances and provision of financial services in Nicaragua. Nicaraguas remittance market represents an important component of its Balance of Payments. There is, however, limited evidence on the impact of these remittances on economic growth and development. The paper draws on research undertaken for a randomized evaluation of a health insurance program introduced to informal sector workers in Managua, Nicaragua. It examines the relationship between micro-entrepreneurship and remittances, using the results of a baseline survey of randomly selected micro-business owners. Study findings include:

  • Informal sector consists of net remittance senders rather than recipients of money transfers;
  • Micro-entrepreneurs receiving remittances are significantly less likely to have a savings account or a loan from a financial institution than those not receiving remittances;
  • Senders of remittances are more likely to have a loan or savings account with a financial institution than those who do not send remittances.

The paper recommends that MFIs interested in tapping into the remittance market should provide clients financial literacy training and intra-country transfer services.

About this Publication

By Magnoni, B., Matranga, B. & Thornton, R.