Can Mobile Money Systems Have a Measurable Impact on Local Development?

Abstract

Mobile Money Systems can be seen as a technological innovation of high impact on developing countries and poorer population segments. They lower transaction costs and facilitate or enable financial transactions that either did not occur before or that were transacted at a higher risk and price. This has a direct impact on increasing the financial connectedness among distant households and individuals, enabling and facilitating trade, increasing households' ability to share and bear risk, increasing households' ability to allocate their resources more efficiently and modifying households' consumption patters. It further has an indirect impact on the challenging efficiency of the local traditional financial market, boosting local infrastructure and hence increasing labor demand and increasing the need for local innovation. In other words, MMS can be supposed to have a positive impact in terms of households' and the economy's allocation of resources and management of risks. Still, to which extent impact on development and well being can be localized to specific communities is not clear a priori. This paper develops a framework to assess MMS' impact on local development and suggests MMS design strategies that can influence consumption and saving behavior to redirect it so as to boost local development.