Risk Sharing & Transaction Costs: Evidence from Kenya's Mobile Money Revolution

This working paper estimates the impact of transaction cost reductions related to mobile banking in Kenya on informal risk sharing using data from a large panel survey we conducted between 2008 and 2010. The paper find that households without access to mobile money suffer about 7 percent reductions in consumption when faced with negative income shocks, but those with access to mobile money are able to smooth the effects of these income shocks completely. Further, the paper finds that the improvements in risk sharing come from remittances. The paper uses data collected on the rollout of mobile money agents who provide the cash-in and cash-out services to assess the robustness of these effects.