Impact of mobile financial services on household's welfare and inequality

Abstract

In the recent past, substantial development in the empirical techniques and researches on financial inclusion alongside the availability of micro-level data allows for pragmatic inquiry on the impact of digitally driven mobile finance at the household level. This dissertation consists of five inter-related chapters on the impact of financial inclusion through mobile banking on household welfare and inequality in Sub-Saharan Africa. I exploit micro-level data to provide empirical evidence detailing the effect of mobile banking on household saving behavior, credit uptakes, household consumption patterns, income and wealth inequalities. Thus, the five chapters are organized as follows Chapter 1, provides a brief introduction to the study by focusing on the effect of mobile financial services as a form of financial inclusion for sustainable development. The Chapter also aims to highlight the motivation and road-map of this dissertation, in particular, the impact of bank-integrated mobile financial services on household welfare and inequalities; while teasing out the possible contribution to the growing body of literature on the driving force behind its success in a developing country context. Chapter 2, This chapter provides a road-map of financial inclusion focusing on mobile finance revolution in the past decade in developing countries. Focusing on Kenya’s financial market developments, while it discusses and addresses institutional issues focused on ensuring the financial system’s stability and efficiency, in the wake of hybrid integration of mobile financial services with the banking system. Chapter 3, empirically examines using bivariate and instrumental variable approach the impact of integrated mobile banking on rural-urban household’s demand for loans and savings behavior using a micro-level data. The study also explores different channels through which integrated mobile banking affects household’s decision to participate in the credit market and their saving practices. I find a positive and significant impact of integrated mobile banking on loans and savings. The results also indicate that access to financial services through integrated mobile banking channel enhances the likelihood of agricultural dependent household to participate in the credit market and to increase their savings for future plans. The findings also reveal that individual demand for loans and savings using integrated mobile banking increases with formal financial institutions and decline with informal financial institutions. In addition, the findings suggest that there exists complementarity between access to integrated mobile banking and demand for loans and savings for investments purposes, with no significant effect on loans or savings for consumption purposes. Chapter 4, investigates whether integrated mobile banking influences household spending behavior on consumption for physical and human capital investment, and family transfers using instrumental variable estimation technique. The findings obtained are supportive of integrated mobile banking having a positive and significant causal impact on household demand for productive activities beyond total consumption. In particular, I observe that access to integrated mobile banking enables individuals to allocate a significant share of total household consumption on social transfers, and individual’s spending on microbusinesses and education, while, I find no significant impact on health expenditures Chapter 5, examines the effect of integrated mobile banking on income and wealth distribution across different quantiles by exploiting instrumental variable of quantile treatment effect approach. The impact of integrated mobile banking on income seems to be higher at the top 20th quantile level, suggesting financial inclusion through integrated mobile banking significantly affect the top half households compared to bottom poor. Similarly, access to integrated mobile banking services widens wealth disparities between the bottom 10th and 90th quantiles, suggesting it disproportionately benefits richer than the poor in terms of wealth accumulation.