Mobile Banking: The Impact of M-Pesa in Kenya

Isaac Mbiti, David N. Weil

Chapter in NBER book African Successes, Volume III: Modernization and Development (2016), Sebastian Edwards, Simon Johnson, and David N. Weil, editors (p. 247 - 293)
Published in September 2016 by University of Chicago Press
© 2016 by the National Bureau of Economic Research
in Research on Africa

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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This paper was revised on September 8, 2015

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This chapter first appeared as NBER working paper w17129, Mobile Banking: The Impact of M-Pesa in Kenya, Isaac Mbiti, David N. Weil
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