Published on Development Impact

Protecting cash through mobile money?

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This past week was the virtual BREAD development economics conference. While attending from the comfort of my basement, I saw a neat new paper by Emma Riley on how disbursing microfinance loans through mobile money can help women invest more in their businesses.

The setting is urban Uganda. Riley sets up an experiment working with female entrepreneurs who are going to get a loan from the NGO BRAC.  1,000 entrepreneurs get the loan in cash, as per usual. Another 1,000 get their loan in cash, but also get a mobile money account that is supposed to be for their business (the mobile money group). A final 1,000 get their loan via the same kind of mobile money account (mobile disbursement). It’s important to note that at baseline almost all of the 3,000 women already had mobile money. So, the mobile money treatments here should be thought of as a labelled, additional account.

The average loan size was around $370 for businesses that average around $120 per month in earnings.  

Riley collects a range of data, achieving the trifecta of a survey (both a baseline and eight month follow up), focus groups (qual!) and administrative data from the mobile provider (with consent to access respondents’ records).  

The interventions went off mostly as planned. 94 percent of those who were assigned to the mobile money treatment got the account. On the other hand, of those assigned to get their loan through mobile disbursement, 71 percent managed to go through the full process. Some of them (15 percent) refused both the mobile account as well as the disbursement over mobile money, some of them took the mobile money account but wanted their loan in cash (5 percent) and the rest seemed to run into problems with the network connection or power.  Some things to keep in mind with implementing this kind of intervention.

So, what happens? The mobile account on its own does nothing for women’s businesses. On the other hand, the mobile disbursement group sees a jump in profits that’s equal to 15% of the control group mean and have 11% higher levels of business capital.  As another way to benchmark these effects, this increase in capital is 16 percent of the mean loan value.

Do folks in either group use mobile money more? Deposit behavior isn’t strong – only about 13 percent in both groups ever make a deposit into these accounts. And they don’t put in much money. There is a difference on withdrawals: the mobile disbursement group makes an average of 4 withdrawals – which suggests they didn’t just take out all of the money on day one.

And therein lies the first suggestion of what might be behind these results. Riley looks to see if those with self-control issues could be driving the results. She finds significantly higher profit (but not capital) impacts for those with lower self-control at baseline. Now this doesn’t survive Riley’s multiple hypothesis testing, but it’s a potential explanation.

She then turns to look at family pressure, which she measures through an index of: how they play in a game with their spouse, whether they are married, whether they report the spouse and family taking their money, and whether or not their spouse or some other family member had a business at baseline. And here the results are quite strong: those with higher family pressure at baseline get an additional 17 percent bump in their profits from the mobile disbursement treatment. There is still an effect for the less-pressured, but this is only significant at ten percent. In terms of business capital, there is a big effect (25%) for those with family pressure and basically no significant impact for the less-pressured. Riley points out that the control group (who also got a loan), see a decline of their business profits over time when they are in the group facing high family pressure.  Riley follows this pattern through the data, using expenditure data to show us that the mobile disbursement group as a whole is significantly less likely (9 percentage points) to give money to their spouse and that they give significantly less on average. She ties this up nicely with a discussion of the focus groups where women indicated that “the control that the Mobile Disbursement treatment gave to women to use the loan in the way they intended rather than spending it on other things or giving it to other people.” 

Riley then takes us inside the business to see how the funds play out. She starts by looking at the portfolio of business assets that the entrepreneurs hold. Here the mobile disbursement folks are holding a more diverse set of assets, in addition to those with higher value. Now most of these businesses are heavily inventory based (e.g. traders), and indeed, when looking at inventory, Riley finds that the mobile disbursement group has significantly higher inventories.  She shows us that these folks aren’t shifting business types or changing labor – so it’s investment that goes towards growing the business they started with. 

Now one mystery remains: Why didn’t the mobile money group just take their loan and deposit it in their mobile money account? Riley tries to shed some light on this puzzle. First, mobile money isn’t a popular savings option at the start (recall they all have mobile money…and they’re not saving much in these accounts). So maybe they just need to learn?  But Riley shows us that there isn’t really a pronounced time trend.

Maybe it’s the cost and hassle – there is a withdrawal charge (the mobile disbursement group gets an extra 1 percent of the loan value to cover this) and there are the costs of getting to the mobile money agent. Riley can’t rule these out (although it’s important to keep in mind that these costs are low relative to the benefits, so we have to appeal to a behavioral explanation here).  And while we are in the behavioral vein, maybe it’s just because the entrepreneurs hew to the default (perhaps with a dash of procrastination).  It could be that too.  There’s clearly more to learn here.

Before we finish, one more interesting outcome. Riley looks at the impact of the mobile disbursement on a female empowerment index. And here she finds a significant impact, driven mostly by increased control over decision making. So: more control over money, more profits and then empowerment.

These are neat results and a really thoughtfully designed experiment. Now this is what happens after 8 months.  What happens in the longer run? And why don’t those in the mobile money group just put their cash on their phones?   I look forward to the sequels.


Markus Goldstein

Lead Economist, Africa Gender Innovation Lab and Chief Economists Office

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