In Simple Words
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.
Kenyan households facing negative income shocks
- Households not using mobile money
- Weaker protection from shocks
- Households using mobile money
- Stronger protection from shocks
Observed users and nonusers, not random assignment. Spending fell for nonusers; no clear fall for users. Kenya evidence only, not Rwanda.
See source →Study conditions — Jack and Suri, 2014 ↗Research question
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.
Participants
National household samples across Kenya (Jack & Suri 2014) and Rwanda (Blumenstock 2016).
Study Design
Empirical econometric evaluation of internal remittance transfers via cellphone money systems during exogenous shocks.
Results
Mobile money systems significantly lower transaction costs and facilitate domestic risk-sharing across geographically dispersed household networks following environmental or economic shocks.
Takeaway
Expand digital mobile money transfer infrastructure to facilitate domestic risk-sharing and reduce transaction costs for informal safety nets.