The Influence of Digital Money on Economic Growth in Kenya

Abstract

The growth of the economy is a concern to many because it has an influence on the progress of a country and its citizens. It is expected that an economy with a highly advanced digital money system should also experience high economic growth. However, statistics indicate that the economic growth rate in Kenya has been fluctuating and has failed to grow consistently despite numerous policy interventions. This study sought to establish the influence of digital money on Economic Growth in Kenya. The study incorporated a descriptive research technique and a time series approach to analyse the relationship between digital money and economic growth using Kenyan quarterly data from 2011 to 2020. Four variables were used as proxies to measure digital money: - the value of mobile money transactions, the value of cards money transactions, the value of internet banking (EFTs) transactions and agency banking. The findings revealed that all relationships that were tested were positive and significant each with p-Value that was less than 0.05. Further analysis showed F-Calculated (1, 38; α=0.05) was 32.909 (card transactions), 247.029 (EFT transactions), 297.118 (mobile transfer), and 571.417 (active agents). Therefore, the study recommended that there is need for an intensified campaign to sensitize the public on the importance of digital money owing to their flexibility and improved security as compared to carrying physical cash especially in the wake of the COVID-19 pandemic. To the policy makers, the findings suggest that there is need to solidify and enforce strong digital/ICT policy that promotes cashless payments.

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“…However, Olubukola, et al (2023) result disagreed with this study finding, their findings indicates that volume of mobile banking positively and significantly affects gross domestic product. Ramos and Olweny (2021) results from the regression analysis indicated a positive and significant association between mobile banking and gross domestic product in Kenya. Satia and Okle (2020) indicates that mobile banking positively and significantly influences economic growth in the short run and long run in Cameroon H04: Web banking have no positive and significant influence on real gross domestic product.…”

“…The benefits of ATM to a bank are: a useful channel to attract and retain more customers, increases cash in your customers hands, provide convenient service for customers, reduces the amount of bad cheques, saves lots of hidden costs etc (Appah & Inini, 2019). The study conducted by Ramos and Olweny (2021) revealed that automated teller machine positively and significantly influences economic growth in Kenya. Olubukola et al (2023) study in Nigeria suggested that volume of automated teller machine transactions positively impact on economic growth of Nigerian economy.…”

“…mobile banking. The study conducted by Ramos and Olweny (2021) revealed that POS positively and significantly influences economic growth in Kenya. Olubukola et al (2023) study in Nigeria suggested that volume of POS transactions positively impact on economic growth of Nigerian economy.…”

“…The services available on the mobile banking product include: ministatements and checking of account history, alerts on account activity or passing of set thresholds, monitoring of term deposits, access to loan statements, pension plan management, domestic and international funds transfer etc (Anyalenkeya, 2010). The study conducted by Ramos and Olweny (2021) revealed that mobile banking positively and significantly influences economic growth in Kenya. Olubukola et al (2023) study in Nigeria suggested that volume of mobile banking transactions positively impact on economic growth of Nigerian economy.…”

“…It uses the electronic card infrastructure for executing payment instructions and final settlement of goods and services over the internet between the trader and the customer. The study conducted by Ramos and Olweny (2021) revealed that web banking (Electronic fund transfer) positively and significantly influences economic growth in Kenya. Olubukola et al (2023) study in Nigeria suggested that volume of web banking transactions negatively impact on economic growth of Nigerian economy.…”