Mobile Money as a Stepping Stone to Financial Inclusion: How Digital Multisided Platforms Fill Institutional Voids

Abstract

The literature on institutional voids examines how intermediaries, such as business groups and business incubators, address such voids in emerging economies. However, it remains unclear whether and how digital multisided platforms fill these voids given their unique features. This study focuses on mobile money platforms, which allow users without bank accounts or credit cards to perform financial transactions. We propose that these platforms fill institutional voids in three ways by (i) enabling data-based certification, (ii) providing unified access to distributed services, and (iii) scaling through network effects to reach previously excluded market participants. We argue that these novel mechanisms enable mobile money platforms to expand credit access to end users from formal financial institutions and thereby act as stepping stones to financial inclusion. Our analysis is based on a difference-in-difference design that leverages regulatory changes that allowed nonbanks to operate as mobile money operators and data from a representative random sample of 151,771 individuals in 78 countries. We supplement our quantitative analysis with rich, hand-collected qualitative evidence to illustrate the mechanisms underlying our findings. Funding: Financial support from the Wharton School of the University of Pennsylvania. Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2022.16562 .