Mobile Phone Communication and Mobile Money Adoption in Burkina Faso : A Direct and Indirect Network Effects Analysis

In this paper, we investigate the role of direct and indirect network effects on mobile money adoption in Burkina Faso. Here, there is (positive) direct network effect if the utility derived from the use of mobile money increases with the number of people using mobile money, and there is (positive) indirect network effect if the utility derived by an individual from the use of mobile money increases with the number of people with whom that individual can communicate on phone. Our methodology consists of a simple theoretical model and an empirical strategy using FinScope data. We find that, in Burkina Faso, mobile money service benefits more from the indirect network effect than the direct network effect. In other words, it is inconsistent to impose huge taxes on phone communication, or limit access to internet, WhatsApp, Facebook and Twitter, while promoting mobile money adoption