In many developing countries, the formal financial sector is
underdeveloped and majority of the population does not have
access to it. This paper analyzes the empirical link between
remittances and financial sector development on a microeconomic
level. Using a unique household dataset for Moldova, we find that
receiving monetary remittances has a positive and significant effect
on the probability of having a bank account, thereby promoting
financial sector development. Furthermore, we show that
remittances tend to have an even higher positive effect on
household savings, which is a sign for a hidden potential for
financial sector development.