Economic Sustainability of Mobile Money Payments in Ghana: Does a Tax on Transactions Matter?

Abstract

Ghana’s mobile money market has been one of the fastest growing in Africa, and among the biggest. However, the recent implementation of an electronic tax on mobile money transactions has created some uncertainty about the expected gains of the promising mobile money industry in Ghana. This study seeks to ascertain the determinants of active mobile money use and to evaluate its sustainability as a payment system in Ghana. Primary data from a probability sample of 400 digital payments subscribers are analyzed using a logistic regression model and cost-effectiveness ratios. The results show that general acceptance, subjective norms and cost of transactions significantly influence the active use of mobile money in Ghana. Also, the mobile money payment system is found to be the most cost-effective payment system among all digital payment systems in Ghana. However, the percentage deterioration in cost-effectiveness of mobile money transactions exceeds the percentage increase in transaction cost for small transactions. Also, the effect of Ghana’s 1.5% electronic levy resulted in more than 50% deterioration in cost-effectiveness of mobile money payments for big transactions. Thus, the tax system is inefficient and regressive, leading to worsening economic conditions for low transaction subscribers.  It is recommended that the electronic levy tax be withdrawn, to make the mobile money payment system effective enough to deliver the cashless economy, for which its use was conceived.