The impact of network coverage on adoption of Fintech and financial inclusion in sub-Saharan Africa

Digital finance plays a major role in improving access to, usage and quality of financial services in developing countries. The use of these platforms has been associated with a positive impact on economic growth and people's welfare. They allow for convenient, secure, and efficient transaction and are the crucial element of e-commerce. In this paper, we analyse the effect of mobile network coverage on adoption of financial technologies and financial inclusion using a survey data of 12,735 individuals from nine sub-Saharan African countries conducted in 2017. By combining survey data with information on the proximity of mobile network towers, we estimate a two-stage model. In the first stage, consumers decide to adopt a technology device, and in the second stage, they decide whether to use digital financial services or not. Results show a significant and positive relationship between network coverage and adoption of digital financial services. Considering that the whole population lives within 2 km radius from the LTE tower, financial inclusion would increase by 6% in Mozambique and 3% in Ghana, Rwanda and Senegal. In Tanzania, where mobile money is the common financial service, investment in GSM and UMTS would have a larger impact on financial inclusion than LTE. These results show that digital financial technologies such as mobile money, mobile banking and e-wallet, that do not necessarily require consumers to be connected to the Internet have a greater impact on financial inclusion in East African countries, where financial service innovations are mobile led. However, in countries where digital financial innovations are bank led, LTE coverage have a greater impact than GSM and UMTS coverage. The findings of this study can help policy-makers to understand the issues related to the expansion of digital financial services and effective strategies to deliver these services to the poor.