Examining the Link between Market Power in the Telecommunication Industry and Financial Inclusion in Ghana

Abstract

It is increasingly acknowledged that the telecommunication industry plays a crucial role in enhancing financial inclusion with a considerable literature that explores the relationship between market power in the telecommunication industry and financial inclusion. The purpose of this study is to examine the link between market power in the telecommunication industry and financial inclusion in Ghana with a focus on the mobile financial service. The study uses secondary sources spanning the period 2012 to 2018, from the World Development Indicators (2018) and annual reports of the National Communication Authority and payment systems reports of the Bank of Ghana. Both descriptive analysis and the Person’s Moment Correlation Analysis were carried out to analyse the data. The result reveals that there is an upward trend in market power in the telecommunication industry. The trend shows the existence of an oligopolistic market structure which is featured by a leading position of two mobile network operators (MTN and Vodafone) in the period under consideration. The study also reveals a persistent increase in the use, value and volume of the mobile money service, which signifies that a lot of the populace is now financially included which can be a step leading to achieving a cashless economy. Furthermore, it is shown that financial inclusion (i.e. active number of users and volume of mobile money transactions) has a positive and significant impact on the payment system (value of mobile money transactions). Moreover, for the macroeconomic variables, population growth has a negative effect, gross national income has a positive effect, whilst literacy rate has an insignificant effect on financial inclusion and payment system in Ghana. Therefore, the regulators should put in place holistic and sustainable mobile money/payment policy actions (revising the e-money issuer guidelines by the Bank of Ghana) which will incorporate mobile money services into all financial operations and sectors within Ghana.