Abstract:
The development and use of Electronic Money (e-money) remain one of the most
discussed topics in developing countries, yet literature on the relationship between
e-money penetration and household consumption remains negligible. Available literature
confirms that e-money penetration has a significant impact on economic activity in both
developed and emerging economies. In Botswana, the advancement of e-money is highly
associated with the forces of consumer demand and the supply of e-money products in the
market. However, the impacts of e-money on household consumption are not known.
This paper, therefore, examines the causal link between e-money (EM) penetration
and Household Consumption (HC) using quarterly data over the period 2007-2017.
The study uses Granger causality test based on the Vector Error Correction Model.
The empirical results provide evidence of the causal impact of household consumption
on e-money penetration in Botswana only in the short-run. In addition, the empirical
results also confirm that if the use of electronic payment technologies is developed in
the long-run, e-money penetration would predict household consumption in Botswana.
It can be concluded that the growth impact of e-money on household consumption is
still insignificant in Botswana, but in the long-run the use of e-money technologies
can impact household consumption. It is therefore, important that the government and
financial service providers continue to provide a more conducive environment to increase
the electronic payment outlets.
