THE IMPACT OF REMITTANCES ON ECONOMIC GROWTH AND ACCESS TO FINANCE

In Western Balkan countries, personal remittances make a substantial part of foreign capital inflow. Even though remittances represent an important source of income for households and individuals, reducing poverty and increasing consumption and welfare, there is a great potential of directing these funds in order to achieve long-run benefits regarding economic growth and development. Economic policies should be implemented to create better conditions for higher investment of remittances into production and human capital accumulation, which can yield greater benefits from both micro and macroeconomic perspective. Recipient country financial development may often be negatively affected by remittances, since they help reduction of existing financial constraint and are mostly directly oriented to consumption. In order for the positive link between remittances and financial development to emerge, development of new remittance-linked financial products is advisable. They would help remittance directing into official transmitting channels and increase remittance receivers' access to other banking products, health insurance and education.