Mobile Money and Financial Inclusion: The Role of Institutional Quality

Abstract

This paper investigates the role of institutional quality in the relationship between mobile money and nancial inclusion in Ghana from 2014 to 2021. It uses annual data from Ghana on a bundle of four nancial inclusion variables, six institutional quality indicators (i.e., rule of law, governance e ciency, control of corruption, voice and accountability, regulatory quality and political stability), and total volume of mobile money transaction in a year. The baseline regression was employed. The empirical results reveal that institutional quality and mobile money have direct impact on nancial inclusion. Also, institutional quality plays positive and signi cant role in the relationship between mobile money and nancial inclusion. Mobile phone subscription, nancial development, in ation and GDPGR in uence nancial inclusion.2020. Several other countries have also seen signi cant growth in mobile money transcations (Mbiti and Weil, 2016;Sahay et al., 2020;Lashitew et al. 2019). This paper identi es how institutional environment supports this growth. Second, institutional environment has been identi ed as fundamental cause of poverty in many countries (Dwumfour, 2020). Major nancial developments, businesses and innovations are protected by country's institutions through regulations, enforcements, supervision and policy recommendations and implementations (Staschen and Meagher, 2018). As such, institutional dimensions that integrate mobile nancial services into the mainstream nancial functions is important determinant for success of nancial innovation services. Third, nancial inclusion which highlights the extent to which signi cant number of the population has access to wide range of quality nancial products and services, has primarily been driven by traditional nancial inclusion vehicles which focus on increasing the number of micro nance companies in rural unbanked communities (Myeni et al. 2019;Khera et al. 2020). However, ine ciency in this sector due to lack of capital, corruption, poor managerial capability, etc., have short-lived the purpose of micro nance companies used as a conduit to nancial inclusion (Serbeh et al., 2021). Therefore, it is important to look at other nancial inclusion delivery channel. This paper focuses on digital nancial inclusion called "mobile money" where nancial inclusion is driven by mobile money services.It is important at this point to differentiate between mobile money and mobile banking. While the former allows customers to access their bank accounts on their mobile phones, the later, on the other hand, allows people to have access to their digital funds stored with the mobile network operators and are not required to have o cial bank account with nancial institution (Sahay et al., 2020).Empirical studies focus more on the relationship between mobile nancial services such as mobile money, nancial technology services (FinTech) and nancial inclusion (eg. see