The informal financial sector in the U.S.: The role of remittances

We investigate the interdependence between being unbanked and the decision to remit. Using data from our survey of the low-to-moderate-income (LMI) Hispanic community in a major U.S. metropolitan area, we find that higher income, more education, and greater proficiency in English decrease the probability of being unbanked. A key result is the positive correlation between latent factors that affect the decisions to remit money and to be unbanked. The presence of both institutional and self-selection factors in the decision to not open a bank account sheds light on the kind of policies that need to be implemented to bring the unbanked into the financial mainstream.