Two Essays on Mobile Money

In developing economies, a significant fraction of the population does not have access to mainstream financial services; therefore, they cannot enjoy the full benefits of savings, credit, and insurance products. Thus, the underprivileged adopt mobile money (on cellular phones) to partake in mainstream finance. Mobile money captures the footprints of the disadvantaged and allows us to study consumption among the poor.

The first essay examines consumer response to a three-week COVID-19 pandemic lockdown in Ghana. Using a difference-in-differences technique, we find that the partial lockdown decreased transaction activities in the lockdown districts versus unlocked districts; cash withdrawals, out-of-network transfers, and consumer-to-business (C2B) spending mainly drove these effects.

However, communication-related transaction activities (i.e., internet purchases) increased significantly in lockdown districts contrasted with districts with no lockdown. Paradoxically, we document “gender and age-related differences” in transaction activities: the lockdown’s negative impact was more prevalent among the young than older adults for total transaction activity and more prevalent among males than females for C2B spending.

The second essay examines the platform-wide impacts of a digital loan product (with a monthly interest rate of 6.9%) launched by a significant mobile financial services provider in Ghana. Directly studying the effects of mobile money loans is not feasible, so we exploit a discontinuity in an eligibility criterion that generates a “near” random assignment of loans at the cutoff.

We find that increases in total consumption stem predominantly from betting and peer-to-peer transfers. Additionally, we provide some descriptive evidence that digital or mobile money loan recipients are likely to default.