William F. Steel
What does ‘microfinance’ really mean in these days of financial inclusion and digital financial services? Is ‘financial inclusion’ simply a rebranding of ‘microfinance’, that is itself a rebranding of ‘microenterprise credit’? In the 1990s, microfinance became recognized as a set of methodologies that can make provision of financial services to the lower-income, ‘unbanked’ population viable and affordable. ‘Banking for the poor’ involved managing the costs and risks that made commercial banks avoid small financial transactions and informal enterprises – largely by passing them on to clients via solidarity groups and by using dynamic incentives such as short repayment periods and gradually increasing loan sizes. Initially, ‘microfinance’ and ‘microfinance institutions’ (MFIs) were virtually synonymous – both implying outside the formal financial system.
Mobile money adoption is gradually bridging the financial inclusion gap in access to financial services between higher- vs. lower-income populations in many developing countries, including Ghana. However, levels of adoption differ within and between countries. Using a nationally representative survey sample of 5,220, this paper examines the determinants of mobile money adoption and use in Ghana and explores how they vary across demographic groups. The probit estimation showed perceived usefulness and social influence as drivers of adoption, while transaction costs inhibit adoption to varying degrees across demographic groups. The major challenges users faced were network failures and high service charges. Measures to enhance mobile network connectivity and liaise with service providers to reduce the service charges would boost adoption and financial inclusion.