Abstract
This study unravels trends and momentum in banking and mobile money channels and uptake of select services and thereafter draws implications for enhancing financial inclusion through Digital Financial Services (DFS). The Rate of Change (ROC) approach was applied to analyze the growth momentum in banking and mobile money channels in Uganda. Implications for growth momentum in banking and mobile money channels for DFS and financial inclusion was drawn from observing and making informed interpretation of such observed trends and momentum. The findings of this study imply that banks must innovate to increase their contribution towards enhancing financial inclusion. Additional channel innovations, which may infuse banking and mobile money channels, are needed for banking to leverage on growth of mobile money and regain its role in enhancing financial inclusion. Leveraging the application of digital innovations in services such as payments and digitizing alternative channels such as agent banking are likely to increase efficiencies in physical channels and the provision of banking services and thereby increase overall reach and penetration of banking. The fast pace of mobile money penetration is good for speeding up financial inclusion. However, this calls for better regulatory approaches for DFS risk reduction, consumer protection, and protecting mobile money against integrity and financial crimes.
Highlights
Innovations in banking (Nkuna et al 2018) and the proliferation of mobile money (GSMA 2016) have given rise to opportunities for growing Digital Financial Services (DFSs) and financial inclusion through alternative channels
The rate of change or momentum of penetration in bank branches and Automated Teller Machines (ATMs) has plateaued at less than 10% since 2014
Plateauing growth in banking threatens to slow down the contribution of banking in enhancing financial inclusion
Summary
Innovations in banking (Nkuna et al 2018) and the proliferation of mobile money (GSMA 2016) have given rise to opportunities for growing Digital Financial Services (DFSs) and financial inclusion through alternative channels. Mobile money has become an efficient and convenient way of conducting various forms of financial transactions including transfers of funds, payments for services, access to microcredit (IMF 2019b) and, micro insurance. Ouma et al (2017) and Kar et al (2011) document the theoretical link between economic growth and financial development. Their studies build on earlier studies (Hermes 1994; Levine 1997; Khan and Senhadji 2003; Trew 2006). The first view can be traced to the work of Schumpeter (1911), which stresses the relevance of financial services in enhancing economic growth. The role of financial institutions is in funding increases in aggregate production and GDP
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