Is mobile money changing rural Africa?

Abstract

What is the economic impact of newly introducing mobile money in rural areas underserved by financial services? This study is the first to use a randomized controlled trial to answer this research question. Following a sample of rural communities in Southern Mozambique, our experimental results show that the availability of mobile money translated into clear adoption of these services, measured through administrative data on mobile money transactions. We find that mobile money improved consumption smoothing by treated households, i.e., they became less vulnerable to adverse weather and self-reported shocks. However, we also observe that mobile money led to reduced investment, especially in agriculture. We document increases in the number of migrants in a household and in the migrant remittances received by rural households particularly in presence of adverse shocks, while there are no clear effects on savings. We interpret these results as evidence that, by drastically reducing the transaction costs associated with migrant remittances and improving migration-based insurance possibilities, mobile money acted as a facilitator of migration from rural to urban areas.