Abstract:
Ghana’s financial sector has seen a transforming change with the introduction of mobile money
services. The service over the years has transformed from being only a money transfer service to
mix of other financial services such as payments and saving services. With mobile money service
seeing increasing growth in terms of agents, customers, transactions and currently with four
Mobile Network Operators in the mobile money industry, the study documents the effects mobile
money services exert on the depth of Ghana’s financial sector development and also the currency
in circulation.
Using monthly data from 2010 to 2016, the study employs an Autoregressive Distributed lag
(ARDL) approach by Pesaran et al (2001) to examine the effect of mobile money transactions on
the depth of Ghana’s financial development and the impact it has on the currency in circulation.
Two Models were estimated in the study. The first was constructed to examine the impact of
mobile money transactions on the currency in circulation and the second captured the effect of
mobile money transactions on financial development in Ghana. The Bound test to cointegration
revealed that all variables in both models converged to a long run equilibrium once there were
deviations in the short run. Both CUSUM and CUSUMSQ tests showed that the long run
relationship of both models were stable.
In the short and long run, mobile money services were found to deepen Ghana’s financial sector
development. Also, mobile money services in Ghana were found to positively increase the amount
currency in circulation.
The study recommends that the use of mobile money service in Ghana should be encouraged. Also
regulators (Bank of Ghana and National Communication Authority) should put in place holistic and sustainable mobile money/payment policy actions. These policy actions should be made to
revise the “e-money issuer guidelines by Bank of Ghana” into a comprehensive mobile
money/payment policy that further incorporates mobile money services into all financial
operations and sectors within Ghana. Again, monetary policy measures by central bank should
take into consideration the mobile money phenomenon as it could influence the currency in
circulation which could affect the effectiveness of its policy.
