Mobile Money Domestic Risk-Sharing
Traditional informal risk-sharing networks suffer from severe spatial friction and high transaction costs during localized economic shocks. Reducing these transfer costs is essential for enabling geographically dispersed families to share financial risk efficiently.
Picture this
Imagine sending emergency money across a country instantly via a simple text message instead of driving hours to deliver cash in person. Removing physical distance and high transaction fees allows extended families to send instant assistance whenever someone faces an unexpected emergency.
What the evidence says
Mobile money systems significantly lower transaction costs and facilitate domestic risk-sharing across geographically dispersed household networks following environmental or economic shocks.
- Who
- National household samples across Kenya (Jack & Suri 2014) and Rwanda (Blumenstock 2016).
- How
- Empirical econometric evaluation of internal remittance transfers via cellphone money systems during exogenous shocks.
What to do
Expand digital mobile money transfer infrastructure to facilitate domestic risk-sharing and reduce transaction costs for informal safety nets.
From the source
"Jack and Suri (2014) and Blumenstock (2016) find that internal remittances via mobile (cellphone) money systems contribute to risk-sharing within Kenya and Rwanda, respectively."
Financial Education and Financial Access for Transnational Households: Field Experimental Evidence from the Philippines