The synergistic effect of remittance inflows and financial development on entrepreneurship development in Africa

Purpose This study aims to investigate the moderating effect of financial development on the relationship between remittances and entrepreneurial activity in Africa between 2006 and 2022 while accounting for the influence of the entrepreneurship ecosystem. Design/methodology/approach To ensure the robustness of the findings, the authors use both the mean-based and moment-based estimation techniques using the Driscoll and Kraay (1998) robust standard error and method of moment quantile regression approaches, respectively. These estimation approaches are robust to cross-sectional dependence and the distributional and heterogeneous effects of remittance inflows on entrepreneurial activity. Findings The results of this study show that remittance inflows have a positive effect on new business entry in Africa. This suggests that remittance inflows to the continent improve the development of entrepreneurial activities. Furthermore, the magnitude of the effects of financial development and remittance inflow on entrepreneurial development is negative. This finding indicates that remittance inflows and financial development play a substitutable role in influencing entrepreneurial activities. The results also reveal that the entrepreneurship ecosystem, a proxy for institutional quality, supports entrepreneurship development in Africa. Practical implications This study highlights several policy implications for achieving a virile financial sector that can strengthen the beneficial effects of remittance inflows on entrepreneurship start-ups on the African continent. Originality/value This study complements existing studies by investigating the moderating role of financial development in the remittance inflow–entrepreneurship nexus in Africa.