Mobile money adoption and response to idiosyncratic shocks: Empirics from five selected countries in sub-Saharan Africa

In sub-Saharan Africa, financial inclusion remains low, with households being more vulnerable to idiosyncratic shocks. Mobile money has been identified as having the potential to boost financial inclusion while closing the related gender- and rural-gaps in the process. Nonetheless, little is known about how mobile money facilitates the sending and receipt of financial support in times of idiosyncratic shocks. This study examines the link between mobile money adoption and response to idiosyncratic shocks from the perspectives of senders and receivers using comprehensive household data across five countries. Employing the number of mobile money agents in respondent's neighbourhood as instrument in an instrumental variable probit procedure, we find that adoption of mobile money is associated with an increase in the probability to send (receive) financial support to (from) families, friends, relatives, co-workers and acquaintances in times of idiosyncratic shocks but the sending effect outweighs that of the receiving. Overall, female-headed and rural-located households end up being the net beneficiaries of mobile money adoption when it comes to idiosyncratic shocks. Mobile money regulators and standard setting authorities are urged to engage with telecommunications companies and other stakeholders to deepen the digital financial ecosystem.