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The effect of mobile money on borrowing and saving: Evidence from Tanzania

Hisahiro Naito, Askar Ismailov and Albert Benson Kimaro

World Development Perspectives, 2021, vol. 23, issue C

Abstract: This study examines the effect of the use of mobile money services on borrowing and saving using data from Tanzania. We estimate the causal effect of the use of mobile money on borrowing, saving, and receiving remittances by applying a two-stage least squares estimation using the shortest distance to the border of the areas with multiple mobile networks, which is a proxy for accessibility to a mobile network, as an instrumental variable, while controlling for distance to financial institutions, population density of the residence, night light luminosity, and other important covariates. We find that when a household experiences a negative shock, mobile money non-users 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 receiving remittances, while it decreases the probability of saving in less liquid assets such as livestock. On the other hand, 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 results indicate that the use of mobile money increases the receipt of remittances regardless of negative shocks and changes the saving portfolio, allowing a household to 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, we find that experiencing a negative shock does not decrease the livelihood of mobile money users, while it does reduce that of non-users.

Keywords: Mobile money; Saving; Borrowing; Remittance; Financial behavior; Portfolio choice (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:wodepe:v:23:y:2021:i:c:s2452292921000588

DOI: 10.1016/j.wdp.2021.100342

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