The effect of mobile Money transfer services on Financial deepening in Kenya

Abstract

Financial deepening is an important development metric globally as one of the factors which can drive widespread economic development by enhancing financial access which increases liquidity in the economy, accelerates the level of economic activity and reduces poverty levels in the country. The introduction of money transfer services in Kenya has seen mobile operators partner with financial institutions to offer wide range of financial products that include payment options, mobile banking, insurance and saving products. However, the effect of mobile money on financial deepening in Kenya remains unknown with no studies have been carried out to evaluate the contribution of various variables to financial deepening in Kenya. The study sought to determine the effect of mobile money transfer services on financial deepening in Kenya. The study used secondary data obtained from Central Bank of Kenya and Kenya National Bureau of Statistics for the period 2009 to 2013. Descriptive research design was adopted by the study. Multiple regression analysis was used to obtain the relationship between financial deepening and mobile money transfer services. The significance of the results obtained was determined using analysis of the variance. The study found that mobile money transfer services have positive effect on financial deepening in Kenya. The study further found that mobile money transfer services have contributed significantly to deepening financial markets mostly out of financial products related to mobile money developed. Mobile transfer services were also found to have contributed significantly to financial access in Kenya. The study recommended that the Central Bank of Kenya to formulate policies to guide the operations of mobile money services and ensure that mobile operators charge lowest costs, consequently promoting penetration of mobile money services.