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Mobile Banking: The Impact of M-Pesa in Kenya

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  • Isaac Mbiti
  • David N. Weil

Abstract

M-Pesa is a mobile phone based money transfer system in Kenya which grew at a blistering pace following its inception in 2007. We examine how M-Pesa is used as well as its economic impacts. Analyzing data from two waves of individual data on financial access in Kenya, we find that increased use of M-Pesa lowers the propensity of people to use informal savings mechanisms such as ROSCAS, but raises the probability of their being banked. Using aggregate data, we calculate the velocity of M-Pesa at roughly four person-to-person transfers per month. In addition, we find that M-Pesa causes decreases in the prices of competing money transfer services such as Western Union. While we find little evidence that people use their M-Pesa accounts as a place to store wealth, our results suggest that M-Pesa improves individual outcomes by promoting banking and increasing transfers.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17129.

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Date of creation: Jun 2011
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Publication status: Forthcoming: Mobile Banking: The Impact of M-Pesa in Kenya , Isaac Mbiti, David N. Weil. in African Successes: Modernization and Development , Edwards, Johnson, and Weil. 2014
Handle: RePEc:nbr:nberwo:17129

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  1. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-51, March.
  2. Spindt, Paul A, 1985. "Money Is What Money Does: Monetary Aggregation and the Equation of Exchange," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 175-204, February.
  3. Esther Duflo & Michael Kremer & Jonathan Robinson, 2011. "Nudging Farmers to Use Fertilizer: Theory and Experimental Evidence from Kenya," American Economic Review, American Economic Association, vol. 101(6), pages 2350-90, October.
  4. Edgar L. Feige, 2005. "The Theory And Measurement Of Cash Payments; A Case Study Of The Netherlands," Macroeconomics 0501025, EconWPA.
  5. Nava Ashraf, 2009. "Spousal Control and Intra-household Decision Making: An Experimental Study in the Philippines," American Economic Review, American Economic Association, vol. 99(4), pages 1245-77, September.
  6. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
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  1. AusAID needs a Technology for Development Strategy
    by Gerard McCarthy in Development Policy Blog on 2013-08-06 20:00:11
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Cited by:
  1. Kikulwe, Enoch M. & Fischer, Elisabeth & Qaim, Matin, 2013. "Mobile money, market transactions, and household income in rural Kenya," Discussion Papers 155847, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
  2. Pascaline Dupas & Sarah Green & Anthony Keats & Jonathan Robinson, 2014. "Challenges in Banking the Rural Poor: Evidence from Kenya's Western Province," NBER Chapters, in: African Successes: Modernization and Development National Bureau of Economic Research, Inc.
  3. Allen, Franklin & Carletti, Elena & Cull, Robert & Qian, Jun & Senbet, Lemma W & Valenzuela, Patricio, 2014. "Improving Access to Banking: Evidence from Kenya," CEPR Discussion Papers 9840, C.E.P.R. Discussion Papers.
  4. Thorsten Beck & Robert Cull, 2013. "Banking in Africa," CSAE Working Paper Series 2013-16, Centre for the Study of African Economies, University of Oxford.
  5. Florence Arestoff & Baptiste Venet, 2013. "Learning to walk before you run: Financial Behavior and mobile banking in Madagascar," Working Papers DT/2013/09, DIAL (Développement, Institutions et Mondialisation).
  6. Graham, Carol & Nikolova, Milena, 2013. "Does access to information technology make people happier? Insights from well-being surveys from around the world," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 44(C), pages 126-139.
  7. Venet, Baptiste & Arestoff, Florence, 2013. "Learning to walk before you run : Financial Behavior and mobile banking in Madagascar," Economics Papers from University Paris Dauphine 123456789/11979, Paris Dauphine University.
  8. Michael King, 2012. "Is Mobile Banking Breaking the Tyranny of Distance to Bank Infrastructure? Evidence from Kenya," The Institute for International Integration Studies Discussion Paper Series iiisdp412, IIIS.

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