Yesterday we wrapped the post by saying that perhaps there’s some way that market indicators such as currency performance and basis rates could indicate the ripeness for a mobile money program in a country.
This begs the question though about whether mobile banking actually leads to better economic outcomes for people, or just tells us that an economy is screwed up and becomes a feel-good bandaid to cover up systemic problems in a banking system. If we look at last year’s currency mess in Kenya, wherein the Schilling earned the unfortunate rank of worst performing currency in the world for a spell, there were two things that bear investigation. The first was the cost of mobile rates going up, as liquidity in the stock exchange decreased damaging the positions of the major carriers leading to higher fees to recoup losses. Along with currency pressures, if transaction prices go up for mobile network access the choice not to bank at all becomes more economically rational. Mobile banking doesn’t help if the currency is failing while nominal prices remain the same.
Back to Kenya; domestic investors bailed (e.g. pension funds, domestic business) as returns tanked in nominal value. But what’s bad for local business is good for external investors. European banks moved in and go good deals on the stock market, increased liquidity and interest rates dropped, stabilizing the currency. What’s interesting to me is whether or not patterns currency fluctuation and inflow of foreign investment has an impact on mobile money uptake. A strong currency and robust banking system might use mobile banking apps, but won’t rely on mobile money solutions since branches are everywhere. A weak economy won’t have the capacity to use mobile money because there might not be enough money, or the currency value will be outweighed by the nominal cost of fees. If mobile money exists in places where currency fluctuations are comment, it might be worth considering the causal relationship between mobile money and economic performance. If there is a causal relationship between mobile money uptake and fluctuations in currency that require injections of frontier capital to maintain interest rates, does mobile money really lead to increasing economic self-determination for the unbanked?
The ongoing discussion I will be having with myself and the literature on structural theories of political economy is going to look a little deeper into the macroeconomic space, particularly around stock markets, that exists in places where mobile money has taken off. I would love insights from others about the mobile money space, and to hear more about the different regulatory regimes on the telecom and banking sides as I think through this.