Mobile based financial services have lifted Kenyans out of extreme poverty: Study

A long running study by Massachusetts Institute of Technology (MIT) has shown that using digital wallets has lead to significant reduction in poverty in Kenya, particularly among households lead by women. The digital wallets available on mobile phones allow Kenyans to save more money, as well as be better equipped to handle times of financial crisis. The study, conducted since 2008, has showed that two per cent of Kenyan Households have since been lifted out of extreme poverty. Mobile financial services have helped 185,000 women start their own businesses, and move on from farming related occupations.Tavneet Suri, an associate professor at the MIT Sloan School of Management says "Previously, we’ve shown mobile money helps you with financial resilience. But no one has understood, if you improve resilience, what happens over the longer term. This is the first study that looks at long-term poverty reduction and at gender."The study focussed on one commonly used mobile transaction service, m-pesa. In Kenya, m-pesa was launched in 2007, a year before the study began. In India, m-pesa has been available since 2014. The study shows that digital wallets have a positive impact on the livelihoods of people. Mobile based financial services have allowed farmers who were only growing crops, to go to the market and sell them, and become merchants.The research saw in increase in spending by households that had a high density of m-pesa agents near them. M-pesa agents handle deposits and withdrawals of the money. The researchers don't yet know exactly why digital wallets boosts per capita consumption and shifts occupations. Some theories the researchers have include that the wallets increase financial security, allows women to manage finances and save better, as well as extends the network of available support when there are periods of financial bad weather. The research was published in Science, and the economists are going to study Tanzania, Pakistan and Uganda next.