Mobile money services, which allow users to store and exchange monetary values via mobile phone, can help lift people in developing economies out of poverty, a new study suggests.
These services have helped Kenyans save more money and weather financial storms, among other benefits, the study said.
“Previously, we’ve shown mobile money helps you with financial resilience. But no one has understood, if you improve resilience, what happens over the longer term. This is the first study that looks at long-term poverty reduction and at gender,” said study co-author Tavneet Suri, Associate Professor at Massachusetts Institute of Technology (MIT) Sloan School of Management.
The study, published in the journal Science, showed that mobile-money services have had notable long-term effects on poverty reduction in Kenya — especially among female-headed households — and have inspired a surprising occupation shift among women.
Suri has studied the financial and social impacts of Kenyan mobile-money services since 2008.
The study estimated that, since 2008, access to mobile-money services increased daily per capita consumption levels of 194,000 of Kenyan households (two per cent), lifting them out of extreme poverty (living on less than $1.25 per day).
Female-headed households saw far greater increases in consumption than male-headed households.
Moreover, mobile-money services have helped an estimated 185,000 women move from farming to business occupations, the study said.
By 2015, more than 270 mobile-money services were operating in 93 countries, with an estimated 411 million accounts, the researchers pointed out.
The Kenyan study is important because it shows that mobile-money services are not just conveniences but do, in fact, have a positive impact on people’s livelihoods, Suri said.
“[That] can be useful for regulators trying to figure out if they want to allow it in their country, or whether someone wants to start a service in their country as an entrepreneur,” said Suri, who co-authored the paper with longtime collaborator William Jack, an economist at Georgetown University in the US.
The study looked at M-PESA, which launched in 2007 and has more than 25 million Kenyan users.
There are more than 120,000 M-PESA (M for Mobile and PESA the Swahili) agents scattered around the country, who handle deposits and withdrawals.
The M-PESA system, introduced by phone provider Safaricom, lets users deposit, transfer and withdraw funds via text messages.
M-PESA is not technically considered to be a bank, and does not pay interest on savings. It does, however, charge fees for withdrawals and transfers.
The researchers found that despite M-PESA’s fees, large numbers of Kenyans are using it for basic banking functions.
Exactly why M-PESA causes increases in per capita consumption and shifts in occupation remains unclear, Suri said.
But the researchers have a few ideas, one being that more secure storing of money leads to better financial management and savings, especially among women.