Effect of Central Bank Policy Response to Promote Mobile Money Transactions in the Context of COVID-19: The West African Economic and Monetary Union (WAEMU) Case Study

Abstract

This article aims to contribute to the literature on policy response to COVID-19 by doing a case study on the West African Economic and Monetary Union (WAEMU) countries. It consists to analyze the effect of the policy response adopted in 2020 by the Central Banque of West African States (CBWAS or BCEAO) to promote mobile payments to limit the spread of COVID-19. The analysis of the digital financial services (DFS) environment shows the need to make efforts at the regulatory and institutional level in order to create a favorable framework for the success of programs aimed to develop the use of mobile money, and to take into account changing needs for innovation. The region has made progress in terms of the use of mobile money, which benefits financial inclusion of the populations. Using a counterfactual impact analysis, we assessed the causal effect of this policy response on mobile money transactions after its adoption, using the method called “difference in differences”. This approach consists in capturing the quantitative effect of this policy by comparing the situation after its implementation and “that which would have prevailed in its absence”. The results showed that this policy has led to an increase in mobile payments of more than 11% on average per month after its adoption, which contributes to strengthening the resilience of populations during the pandemic. The study recommends emphasizing public awareness as part of the implementation of programs, developing adequate policies on access to infrastructure of DFS and accelerating the process of digital transformation in order to create favorable conditions for the development of mobile payments.