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  3. American Economic Review
  4. May 2013
  5. The Home Economics of E-Money: Velocity, Cash Management, and Discount Rates of M-Pesa Users

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

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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.

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

Additional Materials

JEL Classification

  • 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