Mobile Money Regulation and MSMEs Finance-Gap in Africa - Evidence Across Varying Income-Level Economies

Micro, small and medium-sized enterprises (MSMEs) contribute significantly to economic development across Africa, but limited access to finance continues to hinder their growth and sustainability. Mobile money offers opportunities to improve financial inclusion, although the role of regulation in addressing the MSMEs financing gap remains unclear. This study examines the relationship between bank-led and non-bank-led mobile money regulatory dimensions and the MSMEs financing gap in low and lower-middle-income African economies. The study adopts a quantitative explanatory design and uses secondary data from the World Bank and the GSMA. It applies Partial Least Squares Structural Equation Modelling (PLS-SEM) to assess the relationships between regulatory dimensions and the financing gap. The reported findings show significant relationships between the financing gap and all four bank-led regulatory dimensions: transparency requirements, international remittance, identity management and interoperability. For non-bank-led regulation, consumer protection and policy enablement show significant relationships with the financing gap, while integrity does not. The statistical results for authorisation require further verification before its significance can be determined. Overall, the findings show that different regulatory dimensions have different relationships with MSMEs financing. The study highlights the need for policymakers and financial regulators to consider the role of mobile money regulation in promoting financial inclusion and improving the financing environment for MSMEs across Africa.