Mobile money networks with tax-incentives

Abstract

Mobile money (MM) is the most promising tool to enable more individuals living in rural and marginalized communities into the banking sector. Although private companies in some developing countries have transitioned most of its users over to MM, it remains unclear if government-initiated programs would be as successful. By accessing a comprehensive data set of the first MM project to be initiated by a government, we tracked the behavior of users within the MM network. Temporal analysis of network representations of MM transactions shows how agents behave over time and how they react when given tax-incentives for the use of non-cash transactions. Tax-incentives had immediate positive effects on the economic activity of continuing users (number of transactions, mean and total value of transactions) and a marginal effect on their interconnectedness (number of partners and clustering). However, the tax-incentive distorted economic behavior and had a modest effect on the adoption and diffusion of MM over time at a high price tag. Implementation of these new technologies requires consideration of the peculiarity of the different actors and the expansion of the network over time, as well as the specific characteristics of each economy. These findings offer important lessons that would be valuable to other governments and policymakers considering MM.