Money Talks: Simulating the Adoption of Mobile Payments in Honduras

Abstract

Honduras is a small, developing country in the heart of Central America. Its economy is highly dependent on remittances, agriculture and the textile industry. In a country devastated by multiple natural disasters and plagued with persistent government corruption, citizens cite lack of access to financial services as a barrier to economic development. In their studies of financial inclusion across the world, both the International Monetary Fund (IMF) and the World Bank have identified digital financial services as an important financial inclusion tool ideal for integrating disadvantaged sectors of the population. Out of the digital financial services that exist, we choose to focus on understanding the possible benefits of adopting mobile payment services in Honduras, as these have seen much success in other developing economies. This study first seeks to understand what financial inclusion currently looks like around the world using microdata from the IMF's Financial Access Survey, as well as from the World Bank’s Global Financial Index Database. Then, it considers the role that access to mobile payment services played in four different countries: China, Malaysia, Kenya and Tanzania. In addition, this study constructs a simulation in order to describe the possible macroeconomic effects of the adoption of mobile payment solutions in Honduras. Finally, the study takes the lessons learned and puts forward recommendations to broaden the use of mobile payment services in Honduras.