Does Banking Concentration Inhibit the Development of Mobile Money?
Mobile money can drive financial inclusion when it works well, in turn supporting other important development goals. However, mobile money growth has been slow in some countries. This paper examines the reasons for its uneven success, focusing on the hypothesis that a concentrated banking can inhibit mobile money growth through banks' relationships with the financial regulator. Using a dataset of country-year observations from 2014 and 2017, I find that banking concentration has a significant, negative relationship with mobile money uptake. Specifically, a one percentage point increase in banking concentration is associated with 0.18 fewer mobile money accounts per hundred people, holding constant GDP per capita, education, penetration of traditional accounts, mobile (cell phone) subscription density, access to electricity, population density, Ease of Doing Business Rank, and whether or not the country is located in Sub-Saharan Africa. This result is consistent across alternate specifications. This finding suggests that proponents of mobile money may need to take into account the institutional environment as they work to advance financial inclusion.
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