Financial Innovation: The Impact of Mobile Money on Innovative Economic Growth

Abstract

This paper examines the effect of mobile money development on economic growth and development in sub-Saharan Africa (SSA) for 2011–2018 period using the partial least squares (PLS) regression. The causality within and between mobile money development, which include the continuous surge in registered mobile money agents, rapid growth of annual transactions as well as the overall yearly capitalization of mobile money transactions on the sub-Saharan African financial sector development and economy. It was established that mobile money development has a significant impact on economic growth, where GDP per capita was employed as the dependent variable, but the model results may largely depend on the variable used to proxy for economic growth. Also, a significant positive Pearson correlations were found between mobile money activities and financial development as well as GDP, and hence proving that the rise of mobile money activities like number of agents and volume of transactions has an effect on economic development in sub-Saharan African economies per our study model. Mobile money is an alternative mode of banking for the unbanked population; thus, it is not surprising that its expansion and easy access positively affects financial sector growth in the region. Hence, the adoption and development of electronic banking and payment affect the economy through various ways like trade, household consumption and remittances. Although, any policy initiative implemented to encourage and boost this type of payment and banking method may not immediately affect the economy, however, the mobile money system facilitates the pooling of capital and its onward effective allocation to productive sectors, thus promoting and enhancing innovative development in the region.