Can Mobile Money Induce Financial and Entrepreneurial Behaviors of Members of Village Savings and Loan Associations in Rural Malawi?

Abstract

Over 70% of Malawians living in rural areas are excluded from the formal financial sector, which has led to a drive in government's efforts towards increasing financial inclusion through expansion of digital payment systems and group savings (most importantly the Village Savings and Loan Associations (VSLAs)), amongst others. The main aim of the study therefore was to measure the impact of mobile money and financial literacy training together with reminder SMSs among VSLAs members would induce financial inclusion and entrepreneurial outcomes. This was achieved through the implementation of a clustered randomized control trial in two purposively selected districts in Malawi. The trial had two randomly selected study groups each with 21 randomly selected VSLAs: (1) The control arm which received no intervention;and (2) The treatment arm which received face to face training on use of mobile money services for business, financial inclusion, and SMSs reminders on the content of the trainings. We used the Analysis of Covariance (ANCOVA) regression analysis to estimate the casual effect of the intervention. The results indicate that mobile money and financial literacy promotion impacted on knowledge of mobile money services and utilisation of mobile money services. The findings show that the treatment effect of the intervention on the knowledge to use mobile to save money was 6% and the effect on the knowledge that they can take loans was 5%. The treatment effects on usage of mobile money to receive money and usage of mobile money to save money were 10% and 5%, respectively. The treatment also led to the digitization of VSLAs by 7%. With these findings, we conclude that mobile money and financial literacy training together with reminder SMSs has positive impact on mobile money knowledge and utilisation to individuals and VSLAs. The experiment fails to show significant treatment effect on financial inclusion and entrepreneurial behaviour partly due to the length and the timing of the experiment. Further research should consider observing the participants for a longer period.3