Authors: Komivi Afawubo, Mawuli K. Couchoro , Messan Agbaglah and Tchapo Gbandi

Publication site: https://www.tandfonline.com/

Type of document: Article

Date of publication: 2020

Link to the original document

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Introduction

A high proportion of the population in developing countries is unbanked. Thus, to build up savings, for example, households rely mainly on informal networks, such as saving livestock or jewellery, saving at home ‘under the mattress’, saving with a neighbour, or participating in Rotating Savings and Credit Associations (ROSCAs). In the meantime, in Africa, the number of cell phone subscriptions increased rapidly from a 22.9% share of the population in 2005 to 89.4% in 2013 (Chaix and Torre 2015). In contrast, less than 25% of the adult population had a bank account in the same time period (Demirgüç-kunt and Klapper 2013). Thus, mobile telephony seems to have a high potential for opening up access to financial services for unbanked people in developing countries (Assadi and Cudi 2011; Johnson 2016).

In Togo, mobile money users regularly transfer money to a relative, use it to pay service bills (water, electricity, telephone, TV subscription, etc.) and pay in supermarkets, restaurants, etc. (see, African Development Bank (2015), Observatoire de l’Afrique de l’Ouest, N°6 Avril). According to Central Bank of West African States (2017), BCEAO in French, in 2016, the banking rate in Togo was less than 15%, while in 2014, about 67% of the population (4.66 million out of nearly 7 million) subscribed to mobile telephony (Couchoro 2016; Ashta, Demay, and Couchoro 2016).

To build up savings, for example, households rely mainly on informal networks, such as saving livestock or jewellery, saving at home ‘under the mattress’, saving with a neighbour, or participating in Rotating Savings and Credit Associations (ROSCAs)

Therefore, mobile money is set to make a significant contribution to increasing the rate of access to financial services. However, on the ground, this is far from being the case. In fact, by the end of 2014, while mobile money recorded 18.3 million account openings and 259.3 million transactions valued at about 3,760 billion FCFA1 in the West Africa Economic and Monetary Union (WAEMU) zone, Togo’s share in contrast was lower than 1% of account openings, volume and aggregate value of transactions (BCEAO 2014). This illustrates that Togo is lagging behind in the adoption of mobile money in the WAEMU zone. To understand this poor performance of Togo, we need to pinpoint the key socioeconomic factors that determine the adoption of mobile money.

Firstly, [this article] investigates the socio-economic determinants of mobile money adoption in Togo. Secondly, it analyses whether using mobile money makes households less vulnerable to socioeconomic shocks in Togo, taking into account disadvantaged groups across the country, such as people on low incomes, rural inhabitants, women and the less educated.

The adoption process

We model the adoption of mobile money as a 5-step process ranging from possessing a cell phone to having confidence in mobile money services. The ultimate step is confidence in the product, insofar as it directly paves the way to its frequent use, all things being equal. More precisely, a person who adopts mobile money needs to:

• step 1: have a mobile phone;
• step 2: have heard of the service;
• step 3: use the product once;
• step 4: have an account;
• step 5: have confidence in the product.

Results

One of the important results is that the fact of being literate or a microfinance/bank client increases the probability of passing through the first four steps of the adoption process. The case of microfinance institutions seems more interesting. Generally, unbanked individuals (particularly excluded people) are poor, with irregular and insecure income, and currently depend on microfinance and informal finance in order to finance their projects.

Members of a religious group, merchant, literate and/or client of a bank/microfinance institution are more likely to reach the first stage (have a mobile phone) of the adoption process. Indeed, it is well known in African developing countries that religious groups (see Murendo et al., 2016), drive many associations, especially in Togo where religion is strongly rooted in cultures (51.91% of the head of household surveyed). In this context, cell phones are very useful for coordinating members and managing activities. For trader, an acquisition of a mobile phone is useful for business activities. The reason behind being literate is that since usability is fundamental to adopt an innovation, reading and writing can facilitate the use of cell phones by making them easier to operate. Banks and microfinance institutions usually rely on cell phone. Indeed, developing countries like Togo are generally characterized by an absence of formal postal addresses for individuals. Consequently, cell phones constitute a means of communication between financial institutions and their customers. Gender also matters. Actually, men are more likely to have a mobile phone than women.

Being a merchant or self-employed is the only determinants that let pass to the last step of the adoption process (‘confidence in the use of mobile money’)

The second stage of the process, namely, ‘have heard of the service’, involves the same determinants noted at the first stage, in addition of age. Social characteristics are still one of the main determinants of the transition at this step. Urban areas people as well as men are more prone to test the mobile money service. In addition to these characteristics, determinants such as being unemployed, literate, or the client of a microfinance/bank institution increase the probability of reaching the step of using the product at least once. Contrariwise, this probability decreases as individuals become older.

From the fourth stage of the process, that of having an account, four determinants positively influence the probability of having an account; these are: being a man, literate and client of a bank/microfinance institution. Being a merchant or self-employed is the only determinants that let pass to the last step of the adoption process (‘confidence in the use of mobile money’). The frequently used transaction service and mobile money service fit with their needs of money security and fast transactions. For self-employed people and merchants, the reason of their ultimate adoption of this service is that it constitutes an important device to avoid wasting time by going to a formal bank institution to make any financial transactions.

Mobile money and households’ vulnerability to shocks

In general, people using mobile money service are less vulnerable to shocks. The agriculture sector in Togo, which is subject to fickle weather, occupies about 70% of the active population. Shocks related to climate change, such as floods and droughts, negatively affect agricultural production and thus the well-being of a significant portion of the country’s population. Thus, mobile money transfers seem to help overcome some of the climate constraints and agricultural hazards faced by smallholders by smoothing their consumption. In rural locations, compared to individuals living in urban area, households have less access to formal financial institutions. In this situation, offering an access to mobile money services may enhance their tendency to cope with the lack of financial services and ultimately to deal with unpredictable life events. Mobile money adoption/use can help women to bridge the gap between women and men, and this situation ultimately contributes to overcoming unpredictable event such as agriculture shocks.

In general, people using mobile money service are less vulnerable to shocks

It is essential to notice that the least educated are unbanked population. Hence, it is arduous for them to comprehend diverse financial services. Results argue that mobile money helps less educated people during life events. When it comes to low-income vs high-income individuals, the results suggest that mobile money adoption contributes to helping people with low income to resist shocks. Individuals with lowincome may find mobile money as accessible innovation and hence rely more on it to overcome predictable and unpredictable life events than people with high incomes.

Conclusion

Despite the fact that the adoption of mobile money is a very affordable way for the majority of the population to be included in the financial network, Togo still lagging behind in its adoption relatively to other WAEMU countries (see, BCEAO 2014, FinMark Trust, 2016). In the presence of a predominant reliance on informal savings mechanisms, self-insurance against unexpected life events such as health shocks and agricultural risks may not be overcome. In this context, mobile money could provide people with a convenient tool to reduce their vulnerability to emergencies, improve their well-being, and ultimately reduce poverty.

As recommendation, the expansion of mobile telecommunication infrastructure and the increase in mobile phone penetration are good ideas to extend financial services.