Investigating the well‐being implications of mobile money access and usage from a multidimensional perspective

• Published date: 01 May 2022
• Author: Carlos Sakyi‐Nyarko,Ahmad Hassan Ahmad,Christopher J. Green
• Date: 01 May 2022
• DOI: http://doi.org/10.1111/rode.12848

Rev Dev Econ. 2022;26:985–1009.

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985

wileyonlinelibrary.com/journal/rode

Received: 24 October 2020

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Revised: 2 August 2021

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Accepted: 18 November 2021

DOI: 10.1111/rode.12848

REGULAR ARTICLE

Investigating the well- being implications

of mobile money access and usage from a

multidimensional perspective

CarlosSakyi- Nyarko

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Ahmad HassanAhmad

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ChristopherJ.Green

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and

reproduction in any medium, provided the original work is properly cited.

© 2021 The Authors. Review of Development Economics published by John Wiley & Sons Ltd.

Economics Department, School of

Business and Economics, Loughborough

University, Loughborough,

Leicestershire, United Kingdom

Correspondence

Carlos Sakyi- Nyarko, School of Business

and Economics, Loughborough

University, Loughborough, Leicestershire

LE11 3TU, United Kingdom.

Email: c.sakyi-nyarko@lboro.ac.uk

Funding information

This research is funded by

Loughborough University Graduate

School Studentships, Ghana Education

Trust Fund, and a grant by the Economic

and Social Research Council and the

UK’s Foreign, Commonwealth and

Development Office as part of the DFID-

ESRC Growth Research Programme Call

3, under grant number ES/N013344/1:

Delivering Inclusive Financial

Development and Growth

Abstract

Using household survey data gleaned from Ghana, we

carried out a microeconometric analysis of the relation-

ship between mobile money (m- money) and multidi-

mensional well- being. A key feature of this paper is the

computation of a well- being index, incorporating im-

portant household welfare dimensions including health,

education, and wealth, thus allowing an examination of

the link between m- money and well- being from a mul-

tidimensional perspective. Using instrumental variable

probit models with phone ownership and public sec-

tor employment as instruments, we find that although

access to m- money is important it is its usage that has

a profound well- being effect. We also explore alterna-

tive specifications of the models in which access to, and

usage of, m- money explains the variations in the indi-

vidual well- being components, which also relate to the

Sustainable Development Goals. The results from these

alternative specifications suggest that there are signifi-

cant welfare disparities between those who just have ac-

cess to m- money and those who use it frequently. The

policy implication of this finding is that measures that

encourage m- money usage would not only promote

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SAKYI- NYARKO et al.

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INTRODUCTION

At least since the early 2000s, developing countries (particularly in Africa) had been grappling

with how to reach out to the unbanked and underbanked population, who are usually the poor

and often marginalized groups in society (the youth and women). Providing banking facilities

to poor individuals is expensive due to the investments required to establish functioning bank

branches (Ahmad etal.,2020; Beck etal.,2007; Narain,2009). The high transaction costs associ-

ated with reaching out to this segment of the population form the main supply- side constraints

to financial inclusion. Admittedly, this problem is particularly more serious in Africa where good

infrastructure to support financial outreach is lacking, which widens the financial gap in the

region, even among the developing economies (Beck etal.,2007).

The rapid growth of mobile phone penetration in Africa over the past decade— from 28.5

phones per 100 inhabitants in 2007 to 64.8 phones per 100 inhabitants in 2013— has enabled

the introduction of mobile money (m- money) on the continent. It was first introduced in South

Africa in 2006, followed by the continent's most successful m- money, M- PESA in Kenya (Ahmad

etal.,2020; Suri & Jack, 2016). M- money has become ubiquitous in Africa, spreading from East

to West Africa and beyond, and it is emerging as a game changer in many African countries.

This is particularly welcoming as it is considered as an important financial innovation that can

be leveraged to break barriers to financial inclusion, especially in rural areas (Munyegera &

Matsumoto, 2016).

Evidently, financial inclusion has been improving in Africa since the advent of the m- money.

For example, in Ghana, financial inclusion increased by 17% between 2014 and 2017 according

to the Global Findex surveys (Demirguc- Kunt et al., 2018).1 This improvement was largely at-

tributed to the increase in the number of m- money users— 39% of Ghanaians as of 2017 actively

used mobile money as against virtually none in 2009. According to GSMA Global System for

Mobile Communications Association [GSMA] (2015), “m- money has done more to extend the

reach of financial services in the last decade than traditional ‘bricks and mortar’ banking has

in the last century”. The effectiveness of m- money in expanding financial services to the rural

population means greater scope for poverty reduction and improvement in welfare outcomes

and living standards— at least based on theoretical predictions. The Global Findex data indicate

that progress has been made with regard to m- money accessibility in Ghana. However, what the

Global Findex does not show is whether and how m- money access and usage translate into im-

proving the well- being of its users.

This paper provides new research aimed at tackling both these issues in the context of

Ghana. In particular, we first examine whether m- money access does translate into improving

financial inclusion but also lead to improvement in wel-

fare outcomes and living standards, especially in rural

households.

KEYWORDS

financial inclusion, mobile money, well- being

JEL CLASSIFICATION

O12; O16; O33