Effects of Mobile Money Services on Financial Development In Ghana.

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.