Abstract
This paper explores the macroeconomic implications of the global proliferation of mobile finance technologies in developing nations from a modern money theory (MMT)-informed perspective. It begins with an overview of the origins of, and recent developments in the mobile finance industry, and its relationship to traditional finance and banking operations. It next introduces the MMT paradigm, focusing on the implications of three core observations: 1) the tax-driven nature of modern money; 2) the hierarchy of money; and 3) the role of publicly-issued safe assets in minimizing systemic fragility. Then, it explores the implications of the MMT view on contemporary debates around the future of mobile finance, before concluding with a recommendation for the creation of a universal, digital fiat money-based payments system, combined with unlimited liquidity provision by the central bank to the banking system, as a third alternative to the current model banking system and the ‘narrow bank’ model of the 1930’s Chicago Plan.
Keywords: mobile money, mobile finance, e-money, modern money theory, narrow banking, payments system, financial inclusion, development, developing nations, financial technology, digital finance
JEL codes: E12, E26, E40, E41, E42, E44, E51, E52, E58, E61, E63, F54, F62, F63, F65, G21, G32, G23, G28, L86, L96, O11, O16, O17, O23, O30, O31, O33, O38
