Modelling the earnings of mobile money agencies in rural and semi-urban Malawi using panel data approaches

The mobile money business has attracted numerous profit-seeking agencies seeking to benefit from this innovative financial enterprise. Mobile money agents earn commissions from facilitating mobile money services, thereby enhancing uptake of mobile money in developing countries, including Malawi. However, the distribution of mobile money agents is skewed in favour of urban areas. This study explores the extent of mobile money transactions in terms of customer consumption and how this relates to the effective earnings of the facilitating agents in the form of commissions. The study applies an Arellano-Bond dynamic panel data model using data collected from the semi-urban and rural areas of Thyolo District in Malawi. It links the various mobile money transactional activities to the commissions earned by the agents. The study finds that the scope of consumption of mobile money services is narrow and concentrated among cash-in and cash-out transactions. Indirect mobile money products, like power utility credits, do not influence earnings, while bundle purchases and airtime transactions exert significant effects. Although by construction, cash-in and cash-out transactions have a direct variation to the earnings, the economic significance is very low, thus prompting the agents to process high transaction volumes to remain profitable. The results indicate a need to understand economic benefits as a key determinant of agent choice of location.