Key takeaways
- Mobile money brings more households into the formal financial system.
- That can strengthen the link between policy rates and spending.
- Central banks need new data to see the effect.
When a central bank changes its policy rate, the decision is meant to travel through banks, loans and prices until it reaches households and firms. In many African economies that path has been weak, because so much economic life happens outside the banking system. Mobile money is changing the route.
A wider net
Mobile wallets have brought millions of people into formal payments without a bank account. Savings, transfers and small loans that once moved as cash now leave a digital trail and sit, at least partly, inside the regulated system.
What it means for policy transmission
The more households and small firms use formal financial services, the more a change in interest rates can reach their borrowing and saving decisions. Digital credit products priced off market rates create a new channel that did not exist a decade ago.
Monetary policy only works as far as the financial system reaches. Mobile money is extending that reach.
The data challenge
To see this effect, central banks need data from mobile operators and fintechs as well as banks. Building that data, and the skills to analyse it, is exactly the kind of work African analysts are best placed to lead.
As payments go digital, monetary policy gets a new transmission channel. Measuring it well is the next frontier.
Photo: Ali Mkumbwa on Unsplash
