India’s Mobile Money Accounts Rise 95-Fold In Five Years: IMF
The digital payment service PhonePe, operated by Flipkart Online Services Pvt., is demonstrated during an arranged photograph in Bengaluru, India. (Photographer: Samyukta Lakshmi/Bloomberg)

India’s Mobile Money Accounts Rise 95-Fold In Five Years: IMF

As the cash-using Indian economy gradually shifts to digital modes of transactions, further accelerated by the Covid-19 pandemic, the number of registered mobile money accounts in the world’s fifth-largest economy jumped nearly 95-fold between 2014 and 2019.

Based on data from the eleventh annual Financial Access Survey (FAS) 2020 report released by the International Monetary Fund on Monday, there were about 13 such mobile money accounts per 1,000 adults in 2014. That rose to 1,265 in 2019.

The report highlighted that digital financial services, both mobile money and mobile and internet banking, have two key features that can support undisrupted financial transactions during the current pandemic.

First, high levels of market penetration of mobile money in low- and middle-income countries and mobile and internet banking in high-income countries, provide a readily available substitute to move away from in-person cash transactions. Second, the ability to transact with no or almost minimal physical contact is key in these times of social distancing.
Financial Access Survey (FAS) 2020, IMF

The report defines mobile money as a financial service offered by a mobile network operator or another entity that partners with an MNO, facilitated by a network of mobile money agents.

As a percentage of the country's gross domestic product, mobile money transactions grew from 0.02% of GDP in 2015 to 0.9% in 2019.

While the number of mobile money transactions have grown in India, it is still far behind some of the African countries such as Ghana and Cambodia, where the value of mobile money transactions was close to 70% and 90% of GDP in 2019.

While mobile money access grew, the number of automated teller machines per population of one lakh population rose until 2017 but have fallen since from 22 per one lakh people then to 20.95 in 2019.

The number of commercial bank branches per 100,000 adults did not show much change, as it grew just 14% to 14.58 branches over the past five years.

Availability Of Bank Credit

The number of outstanding loans from commercial banks fell from 50.39% of GDP to 48.55% of GDP as non-banking financial companies, micro-finance institutions and digital lenders grabbed market share from the banks.

Further, the outstanding small and medium enterprise loans from commercial banks remained more or less constant at about 6.44% of India’s GDP in 2019, falling marginally from 6.83% in 2014.

The trend in bank lending to SMEs, according to the IMF report, was stagnant across most low- and middle-income countries at about 6% of the GDP between 2014 and 2019.

The lending constraints for micro and small firms could be a limitation for economic relief at a time nearly two-thirds of small businesses are seeing their operations getting affected due the Covid-19 induced crisis, and about one-fifth are facing risks of closing down permanently within three months, according to IMF data collected from 132 countries.

The trend is especially worrying considering SMEs represent about 90% of businesses and more than 50% of employment worldwide, contributing up to 40% of national income (GDP) in emerging economies.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.