Careful in your love of M-PESA and mobile payments to solve every development problem
Do you sometimes feel that every international development organization is in love with mobile money today? That transferring currency equivalents via mobile phones will somehow be a silver bullet for many pressing issues. Why just this week, USAID and Citi Bank announced a global partnership to broaden financial inclusion and adoption of “mobile money” technology in developing countries.
Before you start to believe the hype, check out Cash In, Cash Out Kenya, a detailed report on the role of M-PESA in the lives of low-income people in Kenya. What did they find?
Taken from the transactions of 92 individuals over eight months, the study found that "cash is king." mMoney's share of transactions was less than 6 percent, compared to more that 94 percent for cash. M-PESA is still primarily used to send money home, usually from urban to rural, and cash out almost always happens quickly, often the same day the remittance is received. Respondents did not appear to use M-PESA as a de facto savings account, but the services was an important part of their coping strategies for unusual large expenses, particularly hospital bills.
So rather than being some magical banking solution, it is a glorified private transfer payment system from urban rich to rural poor. Now that in of itself has great value - certainly M-PESA's adoption and usage rates are proof - but it's not a silver bullet for international development. Nothing is.
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