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Mobile Banking

Mobile Banking

The Impact of M-Pesa in Kenya

Chapter:
(p.247) 7 Mobile Banking
Source:
African Successes, Volume III
Author(s):
Isaac MbitiDavid N. Weil
Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226315867.003.0007

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 between 11.0 and 14.6 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.

Keywords:   banking, financial deepening, mobile telephones, e-money, e-cash, velocity, Kenya, M-Pesa, mobile money

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