The Role of Mobile Money in International Remittances: Evidence from Sub-Saharan Africa
Date
2022-03
Authors
Kipyegon, Benard
Journal Title
Journal ISSN
Volume Title
Publisher
African Economic Research Consortium
Abstract
Over the past decade, remittance flow to Sub-Saharan Africa grew at an average of
12.9% and is expected to increase in the coming decade. However, the high cost of
remittances remains a constraint that limits regular remittance flows. About 9.1%
of remittance flows to Sub-Saharan Africa is absorbed by transfer cost, making it
the most expensive remittance recipient region. With evidence that mobile money
services reduce transaction costs for internal remittances, the introduction of mobile
money services in international remittances should have the same effect. Against this
backdrop, this study investigates the effect of introduction of mobile money services
on international remittance transfer costs and determines the effect of international
remittance transfer costs on international remittance flows. Least squares dummy
variable model and a system General Methods of Moments (GMM) is applied to address
the first and second objective, respectively. International remittance transfer cost is
lower by 46% for corridors that incorporate mobile money in international money
transfer channels compared to those that do not. Controlling for other factors, the
gap between corridors that incorporate mobile money and those that do not goes
down to 11.5%. Thus, a reduction in remittance transfer costs can be achieved by
improving cross-border mobile money services interoperability.
Description
Keywords
Remittances, Sub-Saharan Africa, Migration, Remittance cost