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Study: Use of Mobile Money Lifts Nearly 200,000 Kenyans Out of Poverty

December 8, 2016 – A study by a Georgetown economics professor and a colleague at MIT shows that expanding a mobile money system in Kenya helped bring hundreds of thousands of households out of poverty, especially those headed by women.

The study, published today in the journal Science by the university’s Billy Jack and Tavneet Suri at MIT’s Sloan School of Business, focuses on the M-PESA mobile money network.

M-PESA, a text message-based payments system, was introduced in Kenya in 2007, and is now used by 96 percent of households there.

Financial Resilience

The researchers tracked the economic progress of thousands of households and estimate that the expansion of M-PESA lifted 194,000 households, or two percent of households in the country, above the poverty line.

Earlier work by the same authors showed the network improved household financial resilience.

In a country where family fiscal crises otherwise resulted in a 7 percent decrease in consumption, “M-PESA users were able to maintain normal consumption levels in the event of unexpected setbacks,” says Jack.

“With this longer-term data, we’re confident that the proliferation of mobile money has also resulted in a reduction in poverty, especially in households headed by women,” he adds.

The Bill & Melinda Gates Foundation and the Kenyan organization Financial Sector Deepening funded the research.

The academics worked with the research and policy nonprofit Innovations for Poverty Action to study households across much of the country as the M-PESA mobile money network expanded into new localities.

Shifting Occupations

Jack says previous studies of programs thought to reduce poverty, such as microloans, have had mixed results, helping a few but not bringing most borrowers financial stability.

The expansion of M-PESA (M is for mobile and pesa is the Swahili word for money) was particularly beneficial to women, who through the new system gained access to a new way of sending and receiving money.

“We saw that when M-PESA came to an area, women shifted their occupations and their savings went up,” Suri explains. “We estimate that about 185,000 women shifted occupations from subsistence farming to business or retail sales.”

Expanded Presence

This past February, Georgetown announced an expansion of its research on mobile money in Kenya and Uganda, supported by a $3.5 million, two-year grant from the Bill & Melinda Gates Foundation.

The work is led by Jack and administered on campus through the Georgetown University Initiative on Innovation, Development and Evaluation (gui2de).

The research, along with other studies in the region headed by Georgetown faculty, is being coordinated out of gui2de-East Africa, Georgetown’s new research office in Nairobi, Kenya, which opened this past June.

gui2de is jointly convened by the economics department and the McCourt School of Public Policy and co-directed by Georgetown faculty members Billy Jack and James Habyarimana.