Mobile money services allow people to make or receive payments via mobile phones. There were over 270 such systems worldwide by 2015, with over 411 million accounts across 93 countries.
Now, an in-depth study of one mobile money system in Kenya has shown that widespread adoption of the system has helped roughly 2 percent of that country’s population to rise above extreme poverty (living on less than $1.25 per day).
The researchers studied the impact of M-PESA, the most popular mobile money service in Kenya. Users of the service were better able to save and receive money for businesses. A large number of households—both female- and male-led—moved out of poverty by moving to selling food or products they had grown or made rather than simply farming for their family’s subsistence.
“You used to grow vegetables, but now you take your vegetables to the market and sell them, or you open a little food cart or kiosk,” says MIT economist and study co-author Tavneet Suri.
The study itself is valuable for several broader reasons. It could serve as a tool for governments to decide whether or not they wish to allow mobile money services in their countries. It may also help entrepreneurs interested in starting these services get the initial funding they need to develop such software. But primarily, this is an example of how now-ubiquitous technology like mobile phones can help improve quality of life.
Suri and her co-author, William Jack of Georgetown University, have been studying the impact of mobile money systems on poverty in Africa since 2010. “Previously we’ve shown mobile money helps you with financial resilience. But no one has understood, if you improve resilience, what happens over the longer term. This is the first study that looks at long-term poverty reduction and at gender,” Suri says.
The exact reasoning behind these shifts is not yet understood, but what is clear is that mobile money services can help people living in poverty to better manage the money they have, and make it easier for them to be paid for their goods and services.
The researchers are planning on doing similar studies in several other African countries to see if their findings are more broadly applicable, or if the results are specific to Kenya.