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Substituting minutes for money
In developing countries, bank branches and fixed-line telecommunications are scarce, whereas mobile phones are plentiful. These factors have led to the use of mobile money, whereby money can be deposited to an account linked to a phone, transferred to other users, and converted back into cash. Suri and Jack show that increased access to mobile money has increased long-term consumption in Kenya and reduced the number of households in extreme poverty.
Science, this issue p. 1288
Abstract
Mobile money, a service that allows monetary value to be stored on a mobile phone and sent to other users via text messages, has been adopted by the vast majority of Kenyan households. We estimate that access to the Kenyan mobile money system M-PESA increased per capita consumption levels and lifted 194,000 households, or 2% of Kenyan households, out of poverty. The impacts, which are more pronounced for female-headed households, appear to be driven by changes in financial behavior—in particular, increased financial resilience and saving—and labor market outcomes, such as occupational choice, especially for women, who moved out of agriculture and into business. Mobile money has therefore increased the efficiency of the allocation of consumption over time while allowing a more efficient allocation of labor, resulting in a meaningful reduction of poverty in Kenya.
