The Effect of Mobile Money Usage on Borrowing, Saving, and Receiving Remittances: Evidence from Tanzania

Askar Ismailov, Albert Benson Kimaro and Hisahiro Naito

Tsukuba Economics Working Papers from Faculty of Humanities and Social Sciences, University of Tsukuba

Abstract: This study examines the effect of the use of mobile money services on financial behavior using data from Tanzania. We estimate the causal effect of the use of mobile money on borrowing, receiving remittances, and saving by applying a two-stage least squares estimation using the shortest distance to the border of areas with multiple mobile phone networks, which is a proxy of accessibility to a mobile network, as an instrumental variable. We find that when a household experiences a negative shock, non-users of mobile money increase borrowing, while mobile money users do not. Further, the use of mobile money increases the probability of saving in mobile money savings accounts and of receiving remittances, while it decreases the probability of saving in less liquid assets such as livestock. In contrast, we find that the effect of the use of mobile money on receiving remittances is the same for those who experience a negative shock and those who do not. These evidences suggest that the use of mobile money increases the receipt of remittances regardless of negative shocks and changes the saving portfolio, so a household can prepare for negative shocks. Hence, a household that uses mobile money does not need to increase borrowing in the face of a negative shock. Consistent with this interpretation, the negative shock does not decrease the livelihood of the mobile money users while it decreases the livelihood of non-users.

Date: 2019-11
New Economics Papers: this item is included in nep-dev, nep-mfd and nep-pay
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