Abstract
The growth of the economy is a concern to many because it has an influence on the progress of a country and its citizens. It is expected that an economy with a highly advanced digital money system should also experience high economic growth. However, statistics indicate that the economic growth rate in Kenya has been fluctuating and has failed to grow consistently despite numerous policy interventions. This study sought to establish the influence of digital money on Economic Growth in Kenya. The study incorporated a descriptive research technique and a time series approach to analyse the relationship between digital money and economic growth using Kenyan quarterly data from 2011 to 2020. Four variables were used as proxies to measure digital money: - the value of mobile money transactions, the value of cards money transactions, the value of internet banking (EFTs) transactions and agency banking. The findings revealed that all relationships that were tested were positive and significant each with p-Value that was less than 0.05. Further analysis showed F-Calculated (1, 38; α=0.05) was 32.909 (card transactions), 247.029 (EFT transactions), 297.118 (mobile transfer), and 571.417 (active agents). Therefore, the study recommended that there is need for an intensified campaign to sensitize the public on the importance of digital money owing to their flexibility and improved security as compared to carrying physical cash especially in the wake of the COVID-19 pandemic. To the policy makers, the findings suggest that there is need to solidify and enforce strong digital/ICT policy that promotes cashless payments.
Highlights
Technological innovation is a fundamental driver of economic growth and human progress (Broughel & Thierer, 2019)
Results show p-Value = 0.000 < 0.05. This implies that active agents have a significant and positive effect on economic growth in Kenya
The study validates the tenets of financial development theory, financial deepening theory, financial innovation theory and the Technology Acceptance Model (TAM) to have strong and valid hypothesis towards the advancement of mobile money and economic growth
Summary
Technological innovation is a fundamental driver of economic growth and human progress (Broughel & Thierer, 2019). Economic Growth/development is a term used to describe the constant and gradual increasing volume of production or output of a given country. That is the improvement in the gross domestic product (GDP) used as the main operational and measurable indicator of economic development. Economic growth as a long-term derivative of GDP relies on investments that represent that part of the social product that are in the process of its final allocation and used for replacement of worn-out assets, to build new capacity. Digital money refers to the means of transaction that occurs solely in electronic medium, that is via digital currency reported and transmitted through computers. With the current advancement in technology and high rate of adoption of digital platforms, digital money can be transacted using smartphones, credit cards (e.g., ATMs), and online transactions with cryptocurrencies (Chaffey, Edmundson-Bird & Hemphill, 2019). Others include threedimensional printing ( known as additive manufacturing, to boost international trade in designs rather than in finished products), Internet of things (the growing array of Internetconnected devices such as sensors, meters, radio frequency identification (RFID) chips among others), 4G and 5G mobile broadband, Cloud computing and Artificial intelligence and data analytics among others (UNCTAD, 2020)
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