Mobile money helps Kenyans weather financial storms
Only about one-fourth of Kenyans have access to a traditional bank, and many people in the country farm for a living. Add those things together, and the result is that a large number of Kenyans are vulnerable to unpredictable income fluctuations. But a new study co-authored by MIT economist Tavneet Suri shows that a growing form of electronic payments is helping Kenyans weather these financial problems by letting them informally borrow and lend money more easily. The electronic payments system, known as M-PESA, was introduced in 2007 and is now used by at least 70 percent of households in the countryIn a new paper published in the American Economic Review, titled “Risk Sharing and Transaction Costs,” Suri and her co-author, William Jack of Georgetown University, show that income shocks force households without access to M-PESA to reduce their consumption by 7 percent more than households in the M-PESA network. That...