VOL. 2, NO. 5, June 2012 ISSN 2225-7217 ARPN Journal of Science and Technology ©2011-2012. All rights reserved. http://www.ejournalofscience.org 454 Mobile Money in an Emerging Small Island Economy HARSHANA KASSEEAH and VERENA TANDRAYEN-RAGOOBUR Department of Economics and Statistics, Faculty of Social Studies and Humanities, University of Mauritius, REDUIT, Mauritius ABSTRACT This paper examines the relevance of mobile money services in the small island economy of Mauritius. Although so far the use of mobile money in the developing world has been investigated in terms of its relevance to poverty alleviation, this paper shows that mobile money has an important role to play in the upper-middle income country like Mauritius as it may enhance the business environment and the potential for doing business in the island economy. With the high level of financial development in Mauritius, the use of mobile money can help to make transactions faster, cost-effective and more efficient. Mobile money services may in essence serve as a business facilitating tool to promote investment and the ease of doing business in Mauritius. Keywords: Mobile Money Services, Cost-Effective, Regulation 1. INTRODUCTION Mobile money is a suite of financial services offered through mobile phones and other handheld mobile devices. These services can include 1) person-to-person transfer of funds, such as domestic and international remittances, 2) person-to-business payments for the purchase of a range of goods and services, and 3) mobile banking, through which customers can access their bank accounts, pay bills, or deposit and withdraw funds [1]. Mobile money services (henceforth referred to as MMS) can benefit countries in a number of ways. First, it enables faster and more efficient financial transfers, increasing the volume of trade and subsequent payments to workers and their families. This dynamic is especially important for informal trade, which is practiced primarily by low-income, unbanked international, regional and local people. Second, MMS greatly increases access to finance for a large segment of the unbanked people in developing countries. The mobile money industry has grown significantly in scope and sophistication over the last decade. While the number of deployed mobile money initiatives more than doubled in the last year, reaching more than 120 [2], the challenges of realizing mobile money’s full potential as a market opportunity and as a poverty alleviation tool, have also become better recognized. For mobile network operators, a market sizing study by CGAP and GSMA in 2009 found that the average revenue per user for mobile money customers is 74 percent higher than that of non- mobile money customers. This paper investigates the various types of mobile money services provided in Mauritius. Mauritius being a small island developing economy where in terms of its population size has a small market compared to for instance, Madagascar. Moreover the majority of the population still uses traditional banking services and one may argue that Mauritius offers less potential for a classic mobile wallet service or person to person money transfers. However, being an upper-middle income country, the level of financial development in Mauritius is quite high and it offers a vibrant business environment so new forms of innovation and technology like mobile money services may enhance the position of Mauritius as a business destination. There is a good bank penetration and the number of bank branches per 100,000 inhabitants is at 23. This study shows that although mobile money services do not play the same roles in Mauritius as they do in the rest of the sub-Saharan African continent in terms of poverty alleviation, it still has a major role to play in promoting the business environment and potential of the island economy, as it helps to make transactions faster, simpler and more efficient. The rest of the paper is organized as follows: Section 2 reviews the literature on mobile money services in Sub Saharan Africa. Section 3 provides the country background and the situational analysis of Mauritius. Section 4 discusses the different mobile money services in Mauritius. Finally, we conclude in section 5. 2. MOBILE MONEY AND POVERTY ALLEVIATION Mobile phones have evolved in a few short years to become tools of economic empowerment for the world’s poorest people. In developing countries, mobile phones compensate for inadequate infrastructure, such as bad roads and slow postal services, allowing information to move more freely, making markets more efficient and unleashing entrepreneurship. All this has a direct impact on economic growth: an extra ten phones per 100 people in a typical developing country boosts GDP growth by 0.8 percentage points, according to the World Bank. More than 4 billion handsets are now in use worldwide, three-quarters of them in the developing world. Even in Africa, four in ten people