Impact of mobile money on economic growth in Kenya

Wanjohi, Alex

Impact of mobile money on economic growth in Kenya

Master Thesis

2020

Abstract

The purpose of this study was to establish the impact of mobile money on economic growth in Kenya. The strength of the financial sector has generally been found to promote economic growth by increasing economic efficiency, investment and growth. Banks play a vital role in an economy by mobilizing, pooling and channeling domestic savings into productive capital thereby contributing to the economic growth of a country. As such, a competitive and well-developed mobile banking system is an important contributor to economic growth of a nation that has adopted one. This study employed a descriptive survey research design with a correlational approach. This study used secondary data sources. Specifically, data was obtained from the Central Bank of Kenya (CBK) and the Kenya National Bureau of Statistics (KNBS) reports for a period of 11 years (2007 to 2017). The data was analysed using descriptive analysis and time series inferential statistics covering unit root and co-integration analysis as well as the long-run and short run regression estimates. The study findings indicated that money transfer agents have been increasing over the period of the study. The number of transfer agents has also improved since 2007 and showed a great incline especially in 2017 which hit 1,766 thousand agents. Mobile money transfer during the period of study continued to increase progressively as more subscribers were onboarded. In addition, the number of companies providing the service of mobile money transfer has also grown tremendously during the period of the study from one firm in 2007 to several firms by the end of the 2017. The growth has been driven by the ease of the service as mobile money banking does not require an individual to have a bank account in order to transact. The number of customers tremendously increased over the period of the study. From the co-integration analysis, the study finds a long-run significant positive effect of number of customers on economic growth in Kenya over the study period. From the study conclusions, the study recommends that policy makers should consider the role of mobile money transfers while formulating national policies on economic development. This is because despite there being a negligible relationship between mobile money transfers and economic growth, the impact could be pronounced if much change is recorded. Though the relationship may be direct, an indirect one may arise as a result of the convenience that the mobile money transfer services offer to the economy

Keywords

Development Finance

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