Mobile Money in Tanzania

Posted: 1 Apr 2017

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: March 29, 2017

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 to provide evidence of the impact of mobile money on alleviating financial exclusion in developing countries. We identify three types of transactions:(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 to identify the demand for these transactions. Using the demand estimates, we find that the willingness to pay to avoid walking with cash an extra kilometer (short distance self-transportation) and to avoid storing money at home (money storage) for an extra day are 1.25% and 0.8% of an average transaction, respectively, which demonstrates that mobile money ameliorates significant amounts of crime-related risk. We explore the implications of these estimates for pricing and demonstrate the profitability of incentive-compatible price discrimination based on type of service, consumer location, and distance between transaction origin and destination. We show that differential pricing based on the features of a transaction delivers a Pareto improvement.

Keywords: Mobile Phones, Mobile Money Network, Financial Exclusion, Transaction Costs, Tanzania, Banking

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

Suggested Citation

Economides, Nicholas and Jeziorski, Przemyslaw, Mobile Money in Tanzania (March 29, 2017). Available at SSRN: https://ssrn.com/abstract=2943181

Nicholas Economides (Contact Author)

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

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New York, NY 10012
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HOME PAGE: http://www.stern.nyu.edu/networks/

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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