How did the introduction of a mobile money tax in Kenya influence the usage of mobile money?

University essay from Lunds universitet/Ekonomisk-historiska institutionen

Author: Jonas Fehling; [2019]

Keywords: mobile money; Kenya; taxation; Social Sciences;

Abstract: The global spread of mobile phones provides developing countries with new opportunities to spark economic growth and to improve the quality of life of their people. One specific service that emerged in this context is mobile money. Widely recognized as the most successful example is the service M-PESA in Kenya. In 2013 Kenya introduced a 10% excise fee on all financial transaction fees, including mobile money. This tax was criticized by public media and the mobile money providers for hindering the financial inclusion of the poor. This thesis uses a Difference-in-Differences model to estimate the effect of the introduction of the mobile money tax on the usage of mobile money. The results show that the observed decline of mobile money transactions in the first quarter of 2013 are part of regional trend rather than caused by the tax. The paper cannot explain the cause for this regional phenomenon and therefore calls for further research about macroeconomic factors influencing mobile money usage. Finally, a negative effect of taxation on mobile in the case of Kenya in 2013 was not found.

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