Does cellphone banking change lives? Fintech, and poverty in Kenya

Fintech is transforming financial markets globally by expanding access to financial services, particularly for individuals with limited access to traditional banking. While some scholars remain skeptical about its potential, others liken its impact to that of the Industrial Revolution. However, there is limited empirical evidence establishing a causal relationship between Fintech and economic outcomes. This study estimates the causal impact of Fintech on poverty in Kenya using data from 2000 to 2017. Employing the synthetic control method alongside multiple robustness checks, we assess the introduction of M-Shwari—a mobile-based digital credit and savings platform developed by the Commercial Bank of Africa and Safaricom Plc and targeting poor clients excluded from the formal financial system. Our findings indicate that this innovation has significantly reduced poverty: the per capita poverty rate below US$1.90 and US$3.20 decreased by 10% and 4%, respectively. Additionally, using the national poverty rate as a robustness check, we find a sustained decline of approximately 4%, further supporting our main results. These findings provide robust evidence of Fintech’s role in poverty alleviation.