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American Economic Review: Vol. 103 No. 3 (May 2013)

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The Home Economics of E-Money: Velocity, Cash Management, and Discount Rates of M-Pesa Users

Article Citation

Mbiti, Isaac, and David N. Weil. 2013. "The Home Economics of E-Money: Velocity, Cash Management, and Discount Rates of M-Pesa Users." American Economic Review, 103(3): 369-74.

DOI: 10.1257/aer.103.3.369

Abstract

We study the mobile phone-based money transfer system in Kenya. Based on aggregate data, we estimate that the velocity with which units of e-money are transferred among users is approximately four times per month, and that the average number of transfers undergone by a unit of e-money between its creation and destruction is approximately one. Most M-Pesa transactions are made by frequent users. Examination of data on withdrawals shows a high frequency of small withdrawals and no response to "notches" in the price schedule, indicating that many users seem to have high implicit discount rates.

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Authors

Mbiti, Isaac (Southern Methodist U)
Weil, David N. (Brown U)

JEL Classifications

D14: Personal Finance
E42: Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems
O12: Microeconomic Analyses of Economic Development
O16: Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance


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