Complementarity effects of financial development and remittance on agricultural production in Africa

Purpose Empirical evidence abounds on the individual effect of financial development and remittances on agricultural production, but little is known about their complementary role, especially in the context of African countries. This study fills this knowledge gap by examining the moderating role of financial development in the agricultural production–remittance nexus in Africa. Design/methodology/approach Different measures of financial development were employed, and the panel quantile regression model was adopted to analyse panel data of 33 African countries covering the period 2005–2020. Findings The results indicate that the effects of financial development on agricultural production vary across quantiles, and the dynamics of agricultural production are sensitive to the choice of financial development indicator. Nevertheless, financial development and remittances are highly indispensable for improved agricultural production in Africa, as financial development complements the positive effect of remittances on agricultural production. Practical implications African countries need to strengthen their financial sector to facilitate the effective mobilization of remittances and other financial resources for investment in the agricultural sector and the improvement of the sector’s productivity. Originality/value To the best of our knowledge, this is the first study that documents empirical evidence on the complementary role of financial development and remittances on agricultural production in Africa.