Session 1: Overview of research findings from mobile money research

Mobile Money and West Africa: selective issues and challenges from elsewhere. The discussion will cover Macroeconomic Impact
of Mobile Money and expansion of financial inclusion.


Deputy Governor, Bank of Sierra Leone


Sarah Logan, Hub Economist IGC
Dr. Iyabo Masha, International Monetary Fund


Mr. Ivan Ssettimba, Assistant Director, Bank of Uganda

Research summary – Lessons from East Africa

Efficient financial systems are key to poverty reduction. Inefficiencies reduce the potential for financial inclusion to effectively generate growth and reduce inequality.Traditional banking institutions have high transaction costs and make maintaining savings and deposit accounts very challenging for unbanked and poor households. Distance is an additional factor that hinders rural and remote households from accessing financial services. Kenya success with M-PESA can be attributed to a wide range of factors, but one of the most distinctive aspects was the expansion of the agent network:

  • The roll-out of M-PESA was done through a radically different model to that of a traditional bank. Agents were set up across the country, and not just in high-density areas, which is the approach taken by traditional brick-and-mortar bank branches. After just 4 years, M-PESA boasted 30K agents, 14 million users of M-PESA. By 2015, M-PESA had 130K agents across Kenya and more than 27M users.
  • As a platform for encouraging financial inclusion and improving financial literacy of households, M-PESA has been highly transformative. Illustrating this change has been the shift over time in usage of M-PESA in terms of function for users. Early adopters of M-PESA relied on the service primarily as a means of transferring funds. At most, approximately 20% of early adopter accounts maintained deposits, most others would cash out any funds as soon as they received them. Overtime, that number has increased dramatically with more households holding funds in their mobile-wallets. This suggests that financial inclusion can be leveraged as an experience good, with new users adapting and increasing demand for more sophisticated services, over time.
  • With close to 90-95% of Households now using mobile money for some function, we can now measure the effect of mobile money on different types of households. In particular, we can see that low income households are catching up in terms of financial inclusion in the country. The closing of the gap between low and middle-income households can be captured by resilience measures of financial health and wellbeing:
    • Much of the developed world uses some combination of savings and insurance to smooth shocks of varying intensities (death, illness, drought, disease, fire etc.)
    • In Kenya and much of the developing world, private insurance and public sector safety nets are limited, leaving many low-income households incredibly vulnerable to the negative impacts of such unplanned shocks.
    • Instead, informal insurance provided through sharing social and family networks are used to smooth shocks.
  • The lower transaction costs and higher security for resource transfers, provided by M-PESA, has had a significant impact on the financial resilience of low-income households.
    • Risks are pooled over greater geographic networks. This enables the risks to be pooled across households with very different risk profiles, leveraging the benefits of risk diversification.
    • Remittances and transfers can be paid out much faster and over much larger geographic distances.
  • Research by William Jack and Tavneed Suri shows that differences in consumption smoothing by M-PESA users, relative to non-users, results in a 4.6% increase in consumption of M-PESA users, relative to a 7.4% decline in consumption by non-users, in the event of a shock.
  • Over the last 8 years, the impact that M-PESA has had on Kenya has been the following
    • Poverty reduction of about 2 percentage points,
    • Transformation of occupational choice, especially among women. Women using M-PESA are far more likely to move from subsistence farming toward micro entrepreneurship.
  • Further research is needed to explore the impact on poverty reduction of other mobile innovations being trialled in Kenya including M-Shwari – the savings and credit platform, addition to M-PESA and M-Akiba – an innovative government bond that can be traded over mobile phones.


Session Summary written by Upaasna Kaul, Managing Editor & Hub Economist.