Eigitalization Flashcards
What is the core to financial wellbeing
- resilience - the response to shocks
- ## developing countries lack private insurance and public safety nets
what do developing countries have instead of insurance
social ties - creating an insurance network
why can social ties be an issue
- can lead to moral hazard / assymetric information and commitment issues
Why would an insurance system be expensive
their are large transaction costs
- to diversify you need clients with different risk profiles
- But transcations have to cross geographical space which has costs.
- This limits networks to a small geographic space with often correlated shocks.
What are the benefits of a digital payments system in countries where bank
access is extremely poor?
mobile money breaks down the notion that transaction costs are a function of
distance/geography.
what is M-PESA in Kenya
- you can use it on any phone.
- put money in and out of it.
- agents can take physical money and give you virtual money and vice versa.
- no-need for phone credit.
- not integrated with the banking system.
how did the poor adopt MPESA
- started in 2007
- it was slowly adopted among the poor
- in comparison to other goods it was a quick adoption
- in agriculture the adoption of tech is really slow but this was adopted quickly
How do M- PESA agents compare to the banking system
they are 25 times the banking sector in the country
who researched the impact of MPESA on households
Jack and suri
what did jack and suri belive that MPESA did
M-PESA lowered the transaction costs of P2P (person to person) payments.
- mobile money breaks down the notion that transaction costs are a function of
distance/geography.
what questions did Jack and Suri ask about MPESA (5)
what impact it had on households:
- through consumption
- savings
- resilience ti shocks
- earnings/ profits
- personal networks
Jack and suri research design
sample: Large household panel survey across most of Kenya (92%)
conducted when: 2008, 2009, 2010, 2011 and 2014.
Yijt = γShockijt + δUserijt + βShockijt × Userijt + θXijt + αi + njt + πt + ϵijt
Shock is a measure of the income shock.
- User is a dummy variable for whether a household uses M-PESA.
- Xijt are control variables.
what were the results of jack and suri research
- A reduction in poverty of 2 percentage points, approx. 196,000 households
move out of extreme poverty. - Approx. 186,000 women switched their main occupation from farming to
being in a business/retail - there were similar results in tanzania, uganda, mozambique and Bangladesh
what did lee et al research
the effects of mobile money on consumption education health borrowings and savings
what was lee et al 2021 sample and procedure
- focus on rural families which have migrant worker n Dhaka
- 30-45 min training on how to use mobile money
- assistance with paper work and any issues with mobile money
what was lee et al results
- increased consumption and savings in rural households
what did Riley 2022 research about mobile money
Can pressure to share money within the household explain why most female business in developing countries remain small and unprofitable
what was the sample and procedure for Riley 2021
sample: 3000 female microfinance clients in urban Uganda
- control: cash loan
Mobile account: business labelled mm account + cash loan
mobile disbursement: business labelled MM account + loan on MM account
what are the summary statics for Rileys experiment
- 65% married
- 60% spouse had a buissness
- average loan size $400 and average profit $100
- buissness are highly inventory focused
according to riley 2022 how did mobile money help
- increases woman empowerment through two channels:
- increasing woman bargaining power within the household
- better enabling woman to enact their preferences
- Aker et al., 2016 finds that mobile money transfers raise women’s decision
making power, spending on children, mobility and save time. - Bastian et al., 2018 show that mobile savings accounts increased women’s
empowerment in Tanzania.
what heterogenous treatment effects of social pressures to share money
- married
- when has money on hand the spouse / family takes it
- another household business
what did Riley et al find
mobile money allows to resist family pressure
What is one challenge faced by traditional microfinance according to Karlan, Murdoch, and Mullainathan (2010)?
Low take up and high costs of delivery.
What is an alternative to traditional microfinance that is suggested?
Fully digital banking on mobile phones.
how does the digital banking work
- utilises a phone
- uses mobile money
- ## provides credit and saving
How popular is M-Shwari in Kenya?
Over 15 million accounts (75% of adults); 1 in 5 Kenyan adults (4.5 million) have an active loan on M-Shwari.
What are the terms of an M-Shwari loan?
A 30-day loan with a fee of 7.5% per month; the first loan ranges between $1 and $100.
What factors influence an M-Shwari credit score?
M-PESA transactions, airtime expenses, airtime loans, and airtime transfers.
What happens if a loan is repaid on M-Shwari?
The loan limit increases if the loan is repaid and with savings.
What is the consequence of non-payment after 120 days on M-Shwari?
The account is reported to the credit bureau.
What was the key focus of the first paper by Bharadwaj, Jack, and Suri (2021)?
The effects of access to digital credit on outcomes.
What was the take-up rate around the credit score cutoff in the study?
34% of those eligible took it up, much higher than other forms of formal financial access (1-5%).
Did digital credit on M-Shwari substitute for other forms of credit?
No, it led to true expansion, not substitution for other forms of formal/informal credit.
What improvements were noted from access to digital credit?
Improved resilience and a higher propensity to spend on education.
What outcomes were not affected by access to digital credit in the study?
Overall consumption, assets, and employment.
higgins 2021- buissness fin tech reserarch question
Do coordination failures constrain financial
technology adoption?
what did Higgins do 2021
- Exploit natural experiment that shocked financial technology
Mexico distributed 1 million debit cards to cash transfer beneficiaries. (Prospera) - Combine administrative data on debit card rollout with rich collection of
microdata on consumers and retail firms.
What was the purpose of Mexico’s Prospera program from 2009-2012?
To distribute about 1 million debit cards to urban localities (population > 15K).
Who were the recipients of the Prospera program before the intervention?
Urban recipients of the government cash transfer program receiving transfers in a Bansefi bank account, paid every two months.
Flashcard 3
What was the intervention in the Prospera program?
Issuing Visa debit cards attached to the recipients’ accounts.
What functionalities did the Visa debit cards provide to recipients?
They could withdraw funds from any bank’s ATM and use the debit cards at stores accepting Visa.
What is required for the low-adoption equilibrium in the Prospera program?
Network externalities and fixed costs of adoption.
What was a barrier to the adoption of non-bank e-payment companies like Square before 2013?
They did not enter the market until 2013.
What potential tax cost was frequently mentioned in focus groups?
Non-monetary costs, such as paperwork, although formal registration was not required.
What were the effects of the intervention on corner stores according to Higgins (2021)?
Sales increased by 6% and profits increased without cost increases.
How did the intervention affect supermarkets?
Sales decreased by 12%, inventory costs decreased, and there was a small reduction in profits.
What were the estimated welfare gains from the intervention?
Over half of the total consumer gains were spillovers, implying large indirect network externalities.
How did consumer gains from spillovers compare to the costs of the debit card rollout?
Consumer gains from spillovers exceeded the debit card rollout costs by 37 times.
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