The relationship between mobile transfers and economic growth in Kenya

Abstract

The mobile money transfer (MMT) service is an aspect of a broader concept emerging in the electronic payment and banking industry referred to as Mobile Money. Economic growth can be measured in nominal terms. Economic growth measures growth in monetary terms and looks at no other aspects of development. This study sought to establish the relationship between mobile money transfers and economic growth in Kenya.

The study applied descriptive research design. The target population included six mobile phone service providers who provide mobile money transfer services. The total amounts transferred via the mobile for the past five years was collected and then correlated with the economic growth proxy Gross Domestic Product measured by change in GDP. The study used secondary data from the Central bank of Kenya, Mobile phone Companies and Kenya National Bureau of Statistics. The researcher conducted a correlation analysis in order to establish the relationship between mobile money transfer and economic growth.

During the study period, the amount of money transacted through the mobile money transfers increased steadily from 0.06 billion in 2007 on its launch to 118.08 billion by the last month of the analysis. The growth was motivated by the convenience offered by the service as the service does not require an individual to have a bank account in order to transact. Customers also transacted business on mobile money transfer platform from anywhere thus offering convenience.

The correlation analysis conducted established that there was a weak positive insignificant correlation between economic growth and mobile money transfer in Kenya as explained by the Pearson correlation coefficient of +0.027 which was very low with the significance two tailed test figure being 0.966 which was greater than 0.05. The study recommends that the policy makers take mobile money transfer into consideration when drafting policies. This was because of the indirect relationship of mobile money transfer to economic growth through the provision of job opportunities, increased financial deepening and financial inclusion.