Mobile Money: The Economics of M-PESA
This paper reviews the usage and potential impact of M-PESA, a mobile phone-based money transfer system in Kenya.
M-PESA, which was launched in 2007, allows users to deposit money into an account stored on their cell phones, send balances through short message service (SMS) to other users and redeem deposits for cash. The paper states that M-PESA has grown into one of the world’s most successful mobile phone-based financial services. It describes M-PESA’s business model and presents results of a household survey regarding usage patterns across rural and urban populations.
The paper identifies several potential economic effects of M-PESA at the household level. It states that M-PESA could:
- Facilitate trade;
- Increase net household savings by providing a safe storage mechanism;
- Improve allocation of savings across households and businesses by facilitating inter-personal transactions;
- Improve investments in human and physical capital;
- Enable efficient risk-sharing;
- Enable support networks to control negative shocks;
- Empower households to make efficient investment decisions;
- Alter bargaining power within households and networks, and empower women.