MICROCAPITAL BRIEF: “Monetary Theory and Electronic Money: Reflections on the Kenyan Experience” Published by Economists Robert M Townsend of Massachusetts Institute of Technology (MIT), Tavneet Suri of MIT, Economist William Jack of Georgetown University

US-based economists Robert M Townsend and Tavneet Suri from the Massachusetts Institute of Technology (MIT) and William Jack from Georgetown University recently co-authored a paper entitled Monetary Theory and Electronic Money: Reflections on the Kenyan Experience. Data from M-PESA, a Kenya-based cellphone-to-cellphone money management service, and selected models of monetary theory are examined to hypothesize the effects that mobile banking services may have on greater financial systems. The authors propose that mobile banking services are well-positioned to supply insurance, savings and credit services in addition to the relatively common offerings of money transfers and electronic payments. The authors also argue that the shortages of cash and e-money that have occurred with the M-PESA system may be remedied through improved design within the mobile banking system or through modifications of governmental monetary policies.

Published in the First Quarter 2010 issue of the Economic Quarterly, a US-based journal, the paper is available at http://www.richmondfed.org/publications/research/economic_quarterly/2010/q1/pdf/townsend.pdf

By Jacqueline Foelster, Research Associate

About M-PESA: M-PESA is a Kenyan cellphone-to-cellphone cash-transfer service. (The M stands for “mobile” and pesa means “cash” in Swahili.) Launched in 2007 by Safaricom Limited, a Kenya-based cellphone service provider, M-PESA was developed by Vodafone Group Private Limited Corporation, a British multinational mobile network operator, as part of its strategy to reach the bottom of the pyramid with new goods and services. In May 2009, M-Pesa reportedly had 6.5 million subscribers.

Source and Additional Resources:

[1] Press release provided by Consortium on Financial Systems and Poverty to MicroCapital, May 2011. Also available at http://www.cfsp.org/publications/paper/monetary-theory-and-mobile-banking-lessons-kenyan-experience

MicroCapital.org Brief, November 11, 2010, “Survey on Kenya’s M-PESA Mobile Transfer Shows Increased Impact in 2009”, https://www.microcapital.org/microcapital-brief-survey-on-kenyas-m-pesa-mobile-transfer-service-shows-increased-impact-in-2009/

Microfinance Paper Wrap-Up: September 28, 2010, “Saving Through the Mobile Phone – The Case of M-PESA, by Olga Morawczynski, Published by Microfinance Information Exchange (MIX)”, https://www.microcapital.org/microfinance-paper-wrap-up-saving-through-the-mobile-phone-the-case-of-m-pesa-by-olga-morawczynski-published-by-microfinance-information-exchange-mix/

MicroCapital Universe Profile: M-PESA, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=M-Pesa

Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/

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