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Kenyans Find the Unintended Consequences of Mobile Money

Andrea_Jimenez's picture

People who work in economic development use the term “unbanked” to describe the roughly one in three people in the world who don’t have a formal bank account. According to the World Bank, the unbanked include almost 60 percent of adults in developing countries and 77 percent of adults making less than $2 a day. In richer countries, banks provide a source of credit and a means of saving to smooth out earnings and accumulate wealth. The World Bank sees bank accounts on mobile phones as a way to give these things to the rural poor, too.

Adopting mobile money, however, is not as straightforward as substituting a phone account for cash in a jar. Developing countries don’t necessarily have a cash economy to begin with. Cash, where it exists, is freighted with social meaning. People who have never had access to banks develop credit and income smoothing without them, through social custom and family ties. A person in Kenya with a brand-new mobile banking account can’t just immediately begin a personal credit history and build equity, the way a young adult would expect to in the U.S. or Europe. You can’t suddenly stop financing through your family or abandon the social rituals attached to gifts, just because you’ve bought a phone.

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