Mobile Money is Driving Financial Development in Africa

DIW Weekly Report 21/22 / 2020, S. 253-259

Katharina Lehmann-Uschner, Lukas Menkhoff

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Abstract

Mobile money is an innovation that allows financial transactions to be performed via a cell phone. Even in poor regions of Africa, almost everyone has a cell phone; therefore, mobile money could both contribute to the continent’s economic growth and ensure that no Africans are excluded from access to financial services. However, DIW Berlin data from Uganda show that mobile money is actually used less frequently than the number of mobile money accounts suggests. Nevertheless, demand for financial services has increased by 20 percentage points since the introduction of mobile money. At the same time, a fourth of the population—the poorest, in particular— remain financially excluded. In addition to high costs, this is mainly due to the insufficient availability of mobile money in rural areas and a lack of financial literacy. Consequently, to increase the use of mobile money and thus promote economic development in Africa, an appropriate competition policy, requirements for an enhanced network coverage, and financial literacy trainings are necessary.

Lukas Menkhoff

Abteilungsleiter in der Abteilung Weltwirtschaft

Katharina Lehmann-Uschner

Wissenschaftliche Mitarbeiterin in der Abteilung Weltwirtschaft



JEL-Classification: G21;G51;O16
Keywords: mobile money, financial development, financial inclusion, consumer protection
DOI:
https://doi.org/10.18723/diw_dwr:2020-21-1