Mobile Money Use: The Impact of Macroeconomic Policy and Regulation

Lorna Katusiime

doi:10.3390/economies9020051

Abstract

This paper examines the effects of macroeconomic policy and regulatory environment on mobile money usage. Specifically, we develop an autoregressive distributed lag model to investigate the effect of key macroeconomic variables and mobile money tax on mobile money usage in Uganda. Using monthly data spanning the period March 2009 to September 2020, we find that in the short run, mobile money usage is positively affected by inflation while financial innovation, exchange rate, interest rates and mobile money tax negatively affect mobile money usage in Uganda. In the long run, mobile money usage is positively affected by economic activity, inflation and the COVID-19 pandemic crisis while mobile money customer balances, interest rate, exchange rate, financial innovation and mobile money tax negatively affect mobile money usage.

Highlights

Macroeconomic Policy andThe ongoing global COVID-19 pandemic has sparked an economic crisis that could surpass the global financial crisis of 2008–2009, in part because the containment and mitigation measures aimed at limiting the spread of the virus came at the cost of reduced economic activity in many countries (Loayza and Pennings 2020)
The advent of mobile money transformed the landscape of financial inclusion in developing countries, giving access to essential financial services for the vulnerable and poor who constitute a large segment of the population
In view of the paucity of empirical evidence on the impact of macroeconomic and regulatory variables on the usage of mobile money at a national level, this study examines the effect of macroeconomic policy and mobile money tax on the use of mobile money in Uganda

Summary

Introduction

Macroeconomic Policy andThe ongoing global COVID-19 pandemic has sparked an economic crisis that could surpass the global financial crisis of 2008–2009, in part because the containment and mitigation measures aimed at limiting the spread of the virus came at the cost of reduced economic activity in many countries (Loayza and Pennings 2020). While mobile money services were already facilitating financial inclusion in Africa before onset of the pandemic, policy makers put in place measures that support the widespread use of mobile money services as an effective tool for moving money within. In Africa, the continent where financial exclusion is a serious impediment to development, mobile money technology has 26 times the reach of ATMs and 58 times the reach of bank branches (Ahmad et al 2020). This is because unlike conventional banking and financial services, mobile network operators (MNOs) have networks that reach further and deeper into rural areas historically marginalised. Harnessing the full potential of mobile money technology’s ability to facilitate financial inclusion and poverty reduction and development remains a challenge

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