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Demand-Side Mobile Money Drivers of Financial Inclusion: Minimum Economic Growth Thresholds for Mobile Money Innovations

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Abstract

This study provides minimum economic growth (or GDP growth) critical masses or thresholds that should be exceeded in order for demand-side mobile money factors to favorably drive mobile money innovations for financial inclusion in developing countries. The considered mobile money innovations are mobile money accounts, the mobile phone used to send money, and the mobile phone used to receive money. The empirical evidence is based on tobit regressions. For positive net relationships that are established, an extended analysis is engaged to provide minimum GDP growth levels required to sustain the positive net nexuses. From this extended analysis, in order for economic growth to modulate demand-side mobile money drivers to favorably influence mobile money innovations, minimum GDP growth rates are (i) 3.875% for the nexus between bank accounts and the mobile phone used to send money; (ii) 3.769% for the relationship between automated teller machine (ATM) penetration and the mobile used to send money; and (iii) 3.666% for the nexus between ATM penetration and the mobile phone used to receive money.

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Notes

  1. Throughout the study, “mobile phones” and “the mobile” are used interchangeably. Mobile money innovations represent mobile money accounts, mobile used to send money, and mobile used to receive money.

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Acknowledgements

The authors are thankful to Addisu A. Lashitew, Robvan Tulder, and Yann Liasse for sharing their dataset.

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Authors and Affiliations

  1. School of Economics, University of Johannesburg, Johannesburg, South Africa

    Simplice A. Asongu

  2. AKFA University, Tashkent, Uzbekistan

    Raufhon Salahodjaev

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  1. Simplice A. Asongu
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Correspondence to Simplice A. Asongu.

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Appendix

Appendix

Appendix 1 Definitions and sources of variables

Variables

Descriptions

Sources

Dependent variables

  

Mobile accounts

Percentage of adults who have personally used mobile phone to pay bills, send or receive money in the past 12 months using a GSMA recognized mobile money service

Financial Inclusion Indices (Findex) database

Sending money

Percentage of adults who used a mobile phone to send money in the past 12 months

Receiving money

Percentage of adults who used a mobile phone to receive money in the past 12 months

Demand factors

  

Account at formal financial institution

Percentage of adults who have an account at a formal financial institution

Global Financial Structure Database (GFSD)

ATM access

Number of ATMs per 100,000 people

Banking sector concentration

The percentage share of the three largest commercial banks in total banking assets

Supply factors

  

Mobile phone penetration — gross and unique subscription rates

Gross mobile subscription rates refer to the percentage of adults in a country with subscriptions to mobile phones based on data from WDI. We used additional data from GSMA (2018) to calculate unique mobile subscription rates by correcting for double SIM card ownership, which differs between rural and urban areas. This correction is based on survey evidence that urban and rural users own 2.03 and 1.18 active SIM cards, respectively

World Development Indicators (WDI), GSMA

Mobile connectivity quality

Measures the average speed of uploading and downloading data through mobile network in 2014 and 2015

GSMA

Mobile connectivity coverage

Measures the weighted average of share of populations covered by 2G, 3G, and 4G mobile data networks (normalized to range between 0 and 100)

GSMA

Telecom regulation

Measures the regulatory quality of the telecom sector in terms of four major criteria: transparency, independence, resource availability, and enforcement capability of the regulator. The index is based on dozens of indicators taken from the International Telecommunication Union’s regulatory database

Waverman and Koutroumpis (2011)

Macro-level factors

  

Rule of law

A measure of the extent to which agents have confidence in and abide by the rules of society

WDI

GDP per capita

GDP per capita in purchasing power parity

WDI

GDP growth

The rate of total GDP growth

WDI

Urbanization rate

Percentage of population living in urban areas

WDI

  1. Mobile accounts is based on the second wave of the survey (2014), and sending money and receiving money are based on the first wave (2011). The variables telecom regulation is based on data for 2011. The two variables measuring mobile connectivity are based on average values for the years 2014 and 2015. For the remaining variables, averages are taken over the years 2010–2014 to smooth out potential year-to-year variations

Appendix 2 Summary Statistics

Variables

Mean

S.D

Min

Max

Obs

Dependent variables

     

Mobile accounts (%)

3.30

7.90

0.00

58.39

145

Sending money (%)

3.10

7.58

0.00

60.48

146

Demand factors

     

Account at formal fin. institution (%)

45.72

31.73

0.40

99.74

147

ATM penetration

43.28

45.03

0.33

279.71

148

Banking sector concentration

71.94

20.70

9.49

100.00

143

Supply factors

     

Unique mobile subscription rate

61.73

23.29

4.23

133.64

199

Mobile connectivity (performance)

11.92

14.69

0.04

67.19

147

Mobile connectivity (coverage)

62.18

27.29

8.88

99.60

147

Telecom regulation

0.41

0.17

0.00

0.74

128

Macro-level factors

     

GDP per capita (log)

9.161

1.226

6.473

11.794

192

GDP growth

3.90

2.82

 − 4.92

11.10

153

Rule of law

 − 0.09

1.01

 − 2.42

1.98

157

Urbanization (%)

58.22

22.85

8.81

100

155

  1. The average values for the dependent variables are calculated across all countries, including those in which mobile money services are not available

Appendix 3 Correlation Matrix

  1. MMA mobile money accounts, Send M sending money, Receiv M receiving money, Bank Ac bank accounts, ATM Pen ATM penetration, BankSC bank sector concentration, UMSr unique mobile subscription rate, MCP mobile connectivity performance, MCC mobile connectivity coverage, TSR telecom sector regulation, GDPpc gross domestic product per capita in PPP (in logs), GDPg GDP growth, RL rule of law, Urban urbanization

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Asongu, S.A., Salahodjaev, R. Demand-Side Mobile Money Drivers of Financial Inclusion: Minimum Economic Growth Thresholds for Mobile Money Innovations. J Knowl Econ 14, 4848–4865 (2023). https://doi.org/10.1007/s13132-022-01042-6

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