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| The MPESA Kiosk |
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People are often exposed to unexpected or large expenses,
such as medical emergencies and school fees. Women in poor communities are more
vulnerable to these shocks. We developed a mobile money savings product with zero
transaction costs using MPESA, a technology that allows one to deposit and
withdraw money using a mobile phone. MPESA is part of the large mobile phone
network Safaricom. There are agents everywhere from whom money can be deposited
and withdrawn. This makes MPESA potentially superior to formal bank accounts:
even in very remote villages, women can easily access the money they store; and
it is a safe place to keep money.
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| A woman at the MPESA kiosk |
To develop a savings product, we needed to include some
form of commitment so that women are able to store money and not spend it
impulsively or share it unnecessarily with other people. However, we needed to
balance this commitment with liquidity. Money has to be easily accessible and
not tied-up if it is needed for an unexpected expense. Fixed deposit accounts,
for example, would not be very useful for emergency expenses.
Among women in western Kenya with an already existing
MPESA account, we gave half of these women a second MPESA account that is
dedicated to savings for emergency expenses and other savings goals. Having a
second account would separate savings from money that they would otherwise use
for all other expenses, but it would also be easily accessible. For the first 3
months, we also reimbursed transaction costs for the second MPESA account and
sent weekly SMS reminders of the savings goals that each woman had set for herself.
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| Inside the MPESA kiosk |
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We compared women that were given the second accounts to
women who weren’t. We found that savings that was dedicated to emergencies
increased for those assigned the second accounts. Moreover, from initial
interviews with women in the community, it seems that the second accounts did help
to cover emergency expenses. Implementing this was not costly, and is thus
easily scalable. A second MPESA account costs $1.7 per person. Transaction cost
reimbursement was $0.6 per month per person, and an SMS costs only $0.02 to
send.
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| The house of Eunice, a MPESA account holder |
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Eunice is one of the women in our study who was randomly
assigned a second MPESA account. She is a widow, who sells tomatoes and fish to
women in her same village. We chatted with her to understand her experience
with the account. “The second account is where I will put small amounts of
money, that I can then use if I have a problem. If I put the savings in my
first account, then I am likely to spend it since I walk around with my first
account. But, my second account stays at home.”
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| Some of Eunice's tomatoes |
With the small savings Eunice had accumulated, she was
able to buy school uniforms, basins and plates, all worth about $12. This is
sizeable considering that the average monthly income of women in this village
is only $67. She also tells us, pointing to the boy, “my youngest child once became
very sick, so I had to rush him to the hospital.” This cost her about $17 in
medicine and hospital expenses. “Without my savings, I would have figured out
another way, but it would have been much harder.” She explains that she would
otherwise have to go to relatives or friends for help. “Or, I would have likely
sold a chicken.”
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| Children inside Eunice's house |
Eunice is one of the many women in the study. We are more
rigorously looking at the impact of this intervention on a larger set of women.
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