Mobile Money in Tanzania

57 Pages Posted: 22 Dec 2014 Last revised: 6 Aug 2015

See all articles by Nicholas Economides

Nicholas Economides

New York University - Leonard N. Stern School of Business - Department of Economics

Przemyslaw Jeziorski

University of California, Berkeley - Haas School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: July 30, 2015

Abstract

In developing countries, mobile telecom networks have emerged as major providers of financial services, bypassing the sparse retail networks of traditional banks. We analyze a large individual-level data set of mobile money transactions in Tanzania. Transactions can be classified as (i) money transfers to others; (ii) short distance money self- transportation; and (iii) money storage for short to medium periods of time. We utilize a natural experiment of an unanticipated increase in transaction fees. We find that the demand for long-distance transfers is less elastic than for short-distance transfers, which suggests that mobile networks actively compete with antiquated cash transportation systems in addition to competing with each other. Further, we find that the willingnesses to pay to avoid walking with cash an extra kilometer and to avoid storing money at home for an extra day are 1.1% and 1% of an average transaction, respectively, which demonstrates that m-money ameliorates significant amounts of crime-related risk. We explore the implications of these estimates for pricing and propose Pareto superior price discrimination.

Keywords: mobile money network, financial exclusion, transaction costs, Tanzania, banking, telecommunications, social network, crime

JEL Classification: O16, O17, O33, L14, L15

Suggested Citation

Economides, Nicholas and Jeziorski, Przemyslaw, Mobile Money in Tanzania (July 30, 2015). NET Institute Working Paper No. #14-24, Available at SSRN: https://ssrn.com/abstract=2539984 or http://dx.doi.org/10.2139/ssrn.2539984

Nicholas Economides (Contact Author)

New York University - Leonard N. Stern School of Business - Department of Economics ( email )

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Przemyslaw Jeziorski

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

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