2 0 1 5 E A S T A F R I C A E V I D E N C E S U M M I T J U LY 8 - 9 , 2 0 1 5 | N A I R O B I , K E N YA

A PATHWAY TO FINANCIAL INCLUSION: MOBILE MONEY AND SAVING BEHAVIOR IN UGANDAANNET ADONG | ECONOMIC POLICY RESEARCH CENTER

TABLE OF CONTENTS

• Introduction• Rationale• Data and Methods• Preliminary results

INTRODUCTION

• Exclusion from the formal financial system is a barrier to eradicating poverty (Donovan 2012).• lack of access to financial services reduces households’ ability to invest,

save and respond to shocks (Aker and Wilson, 2013)

• Sub-Saharan Africa - 25 percent own an account in a formal financial institution • 39 percent in Latin America and the Caribbean, and 89 percent in high

income countries (Demirgüç-Kunt and Klapper, 2013)• Poor people use informal saving devices – rotating savings associations,

keep money at home –unreliable methods• An RCT of access to formal savings for businesses in Kenya found

increased business environment and personal income growth among women.

• Findings suggest that savings could be an effective tool to help the poor accumulate funds for investment or consumption (Bauchet et al., 2011; findings from RCTs in microfinance)

• Mobile money has been cited as a platform and a game changer especially for the poor (IFC Mobile Money report 2011; ITU 2013).

RATIONALE

• Examine the association of being a registered mobile money user on the savings behavior of individuals

RATIONALE

• Different context

• Jack and Suri (2012) using two rounds of data set collected in 2007 and 2008 in Kenya find an increased proportion of households using mobile money to save their earnings. • Their definition of savings was however limited to whether or not

an individual had a balance reserve in their phone. • Reasons attributed to saving money in their phones and not

elsewhere were- the ease of use, safety reasons and emergency situations. Similarly, while analyzing data from the 2006 and 2009 financial surveys for Kenya,

• Mbiti and Weil (2011) find out that that the adoption of mobile money decreases the use of informal saving mechanisms such as ROSCAS in addition to increasing the frequency of sending transfers in Kenya 

RATIONALE

• In India for example, a saving mechanism from phone to bank account encouraged low income to save directly from the phone to the bank and it substituted for informal saving methods that were risky (Nandhi, 2012).

• In Tanzania, Tigo Tanzania pays out interest accrued on a mobile money account; an incentive that is directed towards encouraging mobile money savings (GSMA report, 2014).

• Need for new approaches in terms of new services, delivery channels

and providers (Allen et al., 2015).

DATA AND METHODS

• Data

Fin Scope III survey carried in 2013. • Are national geographic and demographic surveys on the demand for,

access and usage of financial services ( Uganda, Kenya, Tanzania, Rwanda, Nigeria, Ghana, Mozambique, Malawi, South Africa, Botswana and Zambia)

• Surveys measure the extent to which financial services and products are used, by whom and what constraints are faced by individuals who do not use financial services.

• Finscope III survey builds on the previous nationally representative FinScope I and II conducted in Uganda in 2006 and 2009 respectively.

Gathered information of the adult population (individuals aged 16 years and above, about 3000), socio economic characteristic and use and non-use of financial services

Able to capture information on the use of mobile money

METHODS

Bank & MDIs

Livestock and other Assets

MFI& SACCOs

ROSCA & VSLA

Mobile Money

Home

8.9

18.4

7.2

28.8

3.2

51.2

• Methods• Instrumental variables – being

a registered mobile money user

DESCRIPTIVE

• Ownership and awareness of mobile money

CharacteristicKnowledge about mobile

money Registered user Currently usingUganda 76.8 33.7 56Below 18 75 8.8 33.718-24 84.5 31.2 53.925-39 80.9 39 61.340-59 74.4 34.3 56.160+ 55.3 20.8 42.4Wealth quintileLowest 62 14.7 31.6Second 68.6 19.6 41.5Middle 76.6 27.8 54.1Fourth 83.6 39.5 63.4Fifth 92.2 56.6 78.4Place of residenceRural 73.5 28.8 50.7Urban 90.7 50.7 74.5Region:Kampala 96.8 60.6 83Central 88.7 36.8 66.7Eastern 70.9 28.3 51.3Northern 65.5 22.9 34.8Western 76.5 36.1 57.4

PRELIMINARY RESULTS

  Mechanism of saving

  Formal InformalNon-bank formal Mobile money

Interaction registered mobile money and distance to semiformal institution 0.238 0.182 0.308** 1.080***Have a bank account 2.139*** 0.183 0.959*** 0.485**

[0.18] [0.13] [0.15] [0.19]

Interaction of age and registered mobile money -0.003 -0.006 -0.003 -0.019*Household sex -0.031 0.228* -0.060 0.355

Regions (cf: Kampala)Central 0.312 0.889*** 0.512* 0.626**Eastern 0.102 0.879*** -0.125 -0.785**Northern 0.636* 1.271*** 0.003 -0.414Western -0.159 1.164*** 0.398 -0.124

Wealth quintile (cf: lowest wealth quintile)

Second wealth quintile -0.311 0.220 0.100 -0.616*Third wealth quintile 0.411 0.382*** 0.501** -0.469Fourth wealth quintile 0.171 0.088 0.313 -1.201***Highest wealth quintile 0.702* 0.046 0.088 -0.985**Constant -2.648*** -1.011** -2.176*** -0.958Number of observations 1,163 1,163 1,163 1,101

CONCLUDING REMARKS

• Saving through the phone is the preferred alternative • individuals far away from semiformal institutions, are younger and at the lowest

wealth quintile. • Mobile money has been able to resolve the market failure associated with accessing formal

and semi- informal services (distance); need for incentives to encourage saving through the phone (savings are still minimal)

• Some Policy options • Regulation: In Uganda, mobile money is still viewed as a payment and transfer

service and not for saving and deposit taking. This limits the extent through which this service can be used for savings mobilization

• For mobile money to grow faster, regulators must encourage investments while guaranteeing fair competition, and assuring customers that systems are secure and their money is safe.

• Connecting mobile money with; the banking system….