Mobile money transfers have no effect on inflation, BoT

Mobile money transfers have no effect on inflation, BoT

The central bank has ruled out the mobile money-inflation link despite increased volume of money sent and received recently because the transactions do not increase money in the system.

The BoT Governor Prof Benno Ndulu said the monthly service of sending and receiving money has reached 861.8bn/-as at end of last December, which has helped to speed up money transfer services to enable citizens to engage on other development activities.

“How M-Pesa (mobile money transfer) is linked to inflation,” the Governor wondered, adding, “This is pure innovation which has simplified the way bills are paid and money transferred…but not fuelling inflation. It cannot in whatever way.”

The trustee account for such services deposited by agents at various banks has reached 97bn/- while transaction has hit 760,000 per day at the end of last December, Prof Ndulu said.

However a study carried by African Development Bank (AfDB) in Kenya claims that the M-Pesa fuelled inflation as the service grew large enough to influence implementation of monetary policy. AfDB holds that financial innovations such as M-Pesa have increased the pace of monetary transactions while increasing cash in circulation, looping more people into the financial sector and leading to demand for goods and services outstripping supply.

A University of Dar es Salaam economist, Dr Haji Semboja, said quality of life and earnings of people have increased, pushing up the demand for money as it’s easier to send money upcountry than before. “Because one can now send and another receive money at the same time, people are easily borrowing their tomorrow’s consumption and therefore spending more,” Dr Semboja told the Business Standard recently.

According to Tanzania Communications regulatory Authority (TCRA) first quarter data (July -September 2011), average spending per user on text messages per month clocked 38.85bn/- from 23,979,870 subscribers countrywide. Inflation was on an upward trend last year, peaking at 19.8 per cent in last December before slightly cooling off in January to 19.7 per cent thanks to monetary tightening by the BoT.

The AfDB report also says that MPesa could affect monetary policy, but BoT ruled that out because money on circulation are based on the senders’ income and does not add to money supply.

CRDB Bank has hugely ...


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