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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.

Suggested Citation

  • Isaac Mbiti & David N. Weil, 2011. "Mobile Banking: The Impact of M-Pesa in Kenya," NBER Working Papers 17129, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:17129
    Note: ME
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    More about this item

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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