The Impact of Network Coverage on Adoption of Fintech Platforms and Financial Inclusion

This paper analyses the effect of mobile network coverage on financial inclusion using the survey data of 12,735 individuals from nine sub-Saharan African countries conducted in 2017. We use the geolocation of respondents to combine the survey data with information on the proximity of mobile network towers. We estimate a two-stage model: in the first stage consumers decide to adopt a technology device, and in the second stage they decide whether to use digital financial services or not. The results show that financial inclusion is positively influenced by mobile network coverage. In counterfactual POLICY BRIEF The Impact of Network Coverage on Adoption of Fintech Platforms and Financial Inclusion Onkokame Mothobi October 2023 / No.798 2 Policy Brief No.798 simulations, we consider that the whole population lives within 2km of the towers of any of these networks and find that the adoption of digital financial services would increase by 2%, on average, depending on the country. Considering a case where the whole population lives within a 2km radius from the LTE tower, financial inclusion would increase by 6% in Mozambique and 3% in Ghana, Rwanda, and Senegal. In Tanzania, where mobile money is a common financial service, investment in GSM and UMTS would have a larger impact on financial inclusion than LTE. These results show that non-Internet-based digital financial technologies have a greater impact on financial inclusion in East African countries than those that require consumers to be connected to the Internet. The results also indicate that digital financial platforms act as substitutes for a bank account among the poor, and as a complement for those who own a bank account.