Mobile Money Services Like M-Pesa Key to Poverty Reduction In Africa

Mobile Money Services Like M-Pesa Key to Poverty Reduction In Africa

M-Pesa, the world’s largest mobile money network, could be the key to poverty eradication in the developing world based on its success in Kenya where almost 200,000 households headed by women are living above the poverty line as a result of the innovation, according to a study by Journal Science.

The service, owned by telecom service provider Safaricom has economically improved the lives of many families in rural parts of East Africa’s biggest economy in the last six years.

“What we saw over six years was impressive. When M-Pesa came to an area, women shifted their occupations and their savings went up,” Thomson Reuters Foundation quoted Tavneet Suri, associate professor of Applied Economics at the Massachusetts Institute of Technology, who took part in the research.

The service can be used to provide financial services to 80 percent of African women who have no access to formal banking.

M-Pesa started in April 2007 in attempts to facilitate financial access for micro-lenders and their clients in Kenya.

There are at least 26.7 million M-Pesa subscribers in the nation, or 80 percent of Kenya’s adult population, according to statistics by Digital Frontiers.

The number of female-headed households living in extreme poverty in the East African country fell by 22 percent, in areas where M-Pesa outlets opened within a six-kilometer radius, according to the study.

Annie Duflo, executive director of the Innovations for Poverty Action, a research organization that participated in the study said that the economic impact on Kenyan rural women can be used by investors to increase mobile money services in other countries, Thomson Reuters Foundation reported.

The study also showed that at least 185,000 women shifted from farming to business occupations due to access to M-Pesa and there was a 22 percent rise in savings.

A similar research will be conducted in Uganda, Tanzania and Pakistan in coming years.

In Africa,  high poverty levels  has forced most women to work in low-income, labor intensive agricultural sector and in family-owned businesses, where they are under-paid and go without pay in some cases

Africa is one of the leading markets in the mobile money sector, with transactions set to surpass $1.3 billion in the next three years, according to statistics by consulting firm, Frost & Sullivan.