Mobile money, Covid-19 and digital payments: evidence from Rwanda

Abstract

Mobile Money is one of the most innovative tools recently introduced to enable financial services in some developing economies, facilitating users to digitally transact without formal bank accounts. This innovation in payment systems has allowed individuals to pay for several services including utility bills, accessing government services through Irembo, buying airtime and transfer of money to and from their mobile money wallets. The study evaluates the impact of mobile money usage and Covid-19 on digital payments of economic outcomes based on rich administrative panel data on digital services from MTN Rwanda, a large Telcom company operating in the country. While mobile money has registered a wide MoMo agent’s network across the country, less is still known whether the MoMo transactions could smooth business transactions during the unavoidable pandemic and lockdown times. The results indicate that MoMo has a significant impact on economic outcomes under study, including number of users and public revenues. It further reveals a shock in MoMo transactions conducted before and after the lockdown period. The interaction with MoMo agents also made the number of users and revenues generated from outcome variables significant and more statistically meaningful. The increase in MoMo transactions during the Covid-19 period is also attributed to policy measures by regulators of MoMo services where fees for individuals and merchants’ transfers were slashed to zero. This shows how the government is faster in taking decisions for using online services. Based on the findings, appropriate and timely policy making helped the increase in MoMo usage and availed opportunities to overcome key challenges faced during the unprecedented times of the pandemic. Relevant recommendations are suggested to help telecom operators, policy makers and regulators to continuously expand and improve MoMo services in the country.