Association for Public Policy Analysis & Management

Mobile money – a financial inclusion solution that can catalyze other development outcomes – works well in some countries and not in others. Is regulation, specifically regulators acting in the interest of the established banking industry, part of the problem?

This paper tests the hypothesis that banking regulatory capture is associated with worse outcomes for mobile money systems. Sandra Suarez identified regulatory capture as a political factor which influences the success of mobile money (Suarez 2016). She suggests that bankers’ influence on regulation issued affects the type of mobile money services which can be offered in a given country, affecting the rate at which the population adopts mobile money (ibid). This paper will test her hypothesis using a quantitative methodology.

This paper models mobile money’s success in a given country as a function of the power of the banking industry and a set of control variables. The observational unit is the country-year for some models and the country for others. I will use a simple OLS regression to model the relationship between the number of mobile money accounts in a country during a given year and independent variables, including the power of the banking industry. Some of these models will include country-fixed effects. Variations of this model include alternate measures of the dependent variable (mobile money success) and independent variable (banking concentration as a proxy for susceptibility to regulatory capture). A second set of models will have the country as the observational unit and the dependent variable coded as success or failure of mobile money in a given country as of 2017. These models will use LPM and probit techniques as appropriate for binary dependent variables.

This analysis has not yet been completed so there are no results available. If results show a negative association between variables that measure regulatory capture and mobile money success, this suggests that would-be providers may wish to seek alternate approaches to deploying mobile money in countries with powerful banking sectors. If the association is positive, this suggests that those countries with powerful banking sectors may be fruitful candidates for mobile money systems. If there is no association, would-be mobile money providers need not treat the banking sector as an obstacle to deployment of a mobile money service.

Suarez, Sandra L. (2016). “Poor People’s Money: The Politics of Mobile Money in Mexico and Kenya.” In: Telecom-munications Policy 40.10-11, pp. 945–955. issn: 03085961. url: http://search.ebscohost.com.proxy.