According to a new paper published in Oxford Open Economics by Oxford University Press, while digital financial services are frequently proposed as a means of reducing inequality, the cost and infrastructure barriers to accessing mobile phones may amplify economic disparities among women in developing countries.
Previous research has indicated that digital financial services have the potential to enhance access to money and, as a result, minimize economic disparities. Many countries have switched to mobile money or digital payments during the COVID-19 epidemic. Rwanda’s government has boosted the use of digital currency transfers. Senegal has increased the use of mobile money and reduced the cost of these services. Ghana currently provides financial transfers via mobile money networks.
The distribution of digital financial services, however, determines who participates in these initiatives and if they have the ability to reach the most disadvantaged. This paper investigates how physical infrastructure and mobile phone network quality, as well as individual attributes such as education, influence access to and use of such services.
This paper investigated the spread of digital finance use among women and its enabling infrastructure, including mobile phone towers, in Nepal, the Philippines, Senegal, and Tanzania using the Demographic and Health Surveys and other geocoded sources. The Demographic and Health Surveys Program, managed by the US Agency for International Development, is a collection of cross-sectional surveys aimed at representing the country’s populations. Although the program is largely a study of women’s health, the 2016 version includes questions asking respondents if they have a bank account and if they use their mobile phones for financial activities.
The findings suggest that the same inequities that underpin traditional finance may have major implications for access to digital financial services. Living in metropolitan areas is related to both traditional financial and digital use, and this is especially true in the Philippines, Senegal, and Tanzania. Women who live in cities are 3.4–15.7 percent more likely to use traditional banking and 0.4–13 percent more likely to use digital financial services, according to these findings.
Inequalities in wealth and education are carried through even more strongly in mobile banking use than in traditional finance in all countries investigated. Higher wealth is closely connected with a higher likelihood of using a mobile phone in all nations. The top wealth quintile is 9.3-27.2% more likely to own a cell phone. In Tanzania, for example, even the cheapest accessible mobile phones will cost 5% of annual income for individuals in the bottom quintile of the wealth distribution, even before including the cost of a mobile phone subscription. Broadband access is much more expensive: in Nepal, the Philippines, Senegal, and Tanzania, one gigabyte of mobile broadband costs 9.1 percent, 3.8 percent, 10.2 percent, and 8.7 percent of the average monthly income, respectively.Furthermore, the average marginal effect of one year of education is significant, with each year of education associated with a 1.22 percent higher likelihood of using mobile banking versus a 0.9–3.1 percent higher likelihood of using traditional finance.
“Digital technologies hold so much promise for improving the way we access financial services,”
Laura Caron
According to this analysis, mobile banking use is still highly unequal, and relevant physical infrastructure, such as cell phone towers, follows the same trends as traditional financial institutions. As a result, it appears that mobile banking may continue to create significant gaps in access to financial services for women in poor nations.
“Digital technologies have so much promise for enhancing how we access financial services,” said Laura Caron, the paper’s author. However, we must ensure that the necessary infrastructure is in place for this to work. If we are to reach individuals who have been excluded from traditional finance, we must likewise promote digital literacy and try to make digital technologies more affordable. If we do not ensure that everyone has access to new technologies, we will not be able to overcome the problem of inequality. “
