Formal financial inclusion and digital mobile money adoption in sub-Saharan Africa: do bank concentration and competition matter?

It is widely accepted that financial inclusion brings significant benefits to individuals, and thereby enhances the economic development of countries. This article examines the role of bank concentration and competition on access to financial services in sub-Saharan Africa through two competing channels, the efficiency channel versus the rent-seeking channel. We distinguish between formal financial services and the emerging digital mobile money technologies. The low level of banking competition and the striking expansion of mobile money in sub-Saharan Africa provide incentives to study and compare both phenomena. Using various competition indicators, we find that bank competition facilitates both banking and mobile financial inclusion. Moreover, bank concentration favours the adoption of digital mobile money. The results suggest that digital mobile money plays a complementary role by increasing mobile financial inclusion in countries that lack financial depth. Furthermore, we find that individuals face the same demographic barriers to both formal and mobile financial inclusion in sub-Saharan Africa: adults who are female, younger, less educated, and poorer are more likely to be financially excluded. We conclude that promoting bank competition should be a key component of the inclusive growth policy agenda of sub-Saharan African countries.