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Botswana’s first study on the causal relationship between e-money penetration and household consumption has found that more use of auto-teller machines (ATMs) and electronic funds transfer at points of sale (EFTPOS) will spur economic growth – as it has elsewhere in the world.
Conducted by Masedi Tshukudu, an Associate Researcher at the Botswana Institute for Development Policy Analysis, the study shows that transition to efficient electronic payment systems have a conducive impact on GDP, consumption, and trade. An earlier, similar study that she quotes shows that card usage raised global consumption by an average of 0.7 percentage, which contributed to an average additional growth in GDP of 0.17 percent per year to the global economy, and that in China it increased from 31 percent in 2008 to an estimated 52 percent in 2012 - which corresponded to an average of 4.9 percent increase in consumption during that period. During 2008–2012, after the financial crisis, e-money penetration in 56 countries which constitute 93 percent of the world’s GDP, added about US$938 billion to the global economy, creating about 1.9 million jobs. In Kenya, e-money users were able to maintain their consumption level during economic shocks than individuals who were not e-money users. On the other hand, declining card usage decreased consumption by 0.003 percent in Greece and 0.04 percent in Finland.
In the study period (the first quarter of 2007 to the third quarter of 2017) the number of ATMs and EFTPOS outlets in Botswana rose from about 2620 to 4728, with the frequency and value of transactions showing a similar trend. In the third quarter of 2017, the total value of transactions stood at more than P12, 536 million, which was an increase from P 9,284 million in the first quarter of the year. During the fourth quarter of the festive season, the value of transaction and the frequency of transaction increased but decreased in the following (first) quarter of the next year.
At this point in time, e-money penetration in Botswana cannot be used to predict household consumption. However, empirical results from Tshukudu’s study confirm that if the use of electronic payment technologies is developed in the long-run, the situation would change. It concludes that the growth impact of e-money on household consumption is still insignificant but that in the long-run, the use of e-money technologies can impact household consumption.
“In the long-run, if the number of ATMs and EFTPOS is increased enough to cover the consumer demands, e-money penetration would lead to increase in household consumption. Therefore, it is important that the government and financial service providers continue to provide a more conducive environment to increase the electronic payment outlets,” says the study.
The money that will be spent has to come from a reliable source and to that end, Tshukudu recommends that the government ought to facilitate consumption through sustainable incomes as well as the creation of employment opportunities. Such opportunities will impact household consumption, which will in turn impact penetration of e-money.
“It is important to note that increase in household consumption can lead to economic growth in the long-run,” Tshukudu asserts.
On the whole, many African countries are at the early stages of developing their financial systems, hence the contribution of e-money to consumption is still minimal. The value of debit and credit cards transactions to private consumption in developed countries was estimated at 28 percent, whereas in emerging economies it was estimated at 8.87 percent. As for African countries, the average contribution of electronic payments to GDP was reported at less than 1 percent. Many African countries are at the early stages of developing their financial systems with appropriate infrastructure to support electronic payments. South Africa, the most developed economy on the African continent, recorded an average of 0.18 percent increase in GDP associated with the use of e-money.