Intangible Money + Cell Network Banks = Secure Money

Olga Morawczynski is a doctoral candidate at the University of Edinburgh, posting some of her work on mobile banking in Africa at the CGAP (Consultive Group to Assist the Poor) website. She noted that the normal flow of fund transfers in Kenya — from the cities to rural relatives — reversed during recent violence there:

[from Findings from the field: An observation on M-PESA usage during the post-election violence]

M-PESA [Kenyan mobile phone payment system] flows reversed during Kenya’s political crisis, with rural users sending money to urban contacts.

As I noted in a previous post - “Why has M-PESA become so popular in Kenya?” M-PESA was used predominantly for the transfer of remittances in the two research sites. Usually these flowed from urban centres like Kibera to rural villages like Bukura. However, there was a reversal in such flows during the post-election crises in Kenya. Urban migrants were receiving money and airtime from their rural relatives.

During this period, money and airtime cards could not be physically transported across the country. Many of the roads were blocked by rioting youth, and the railway was dismantled. This was problematic for many of the urban migrants. They needed money to escape the threat of ethnic violence, and airtime to communicate about their situation.

Some of the migrants received such support from friends and relatives in the village, who transferred both money and airtime via M-PESA. Others withdrew cash from M-PESA if they had a balance in their account. Most banks remained closed during the violence, which further made it difficult to access money. Some agents located in urban areas, which were affected by the violence, confirmed this finding. They asserted that the demand for services was high during this period. They further explained that the nature of transaction had changed—urban customers were making withdrawals rather than deposits.

This example highlights one of the major benefits of M-PESA—it reduces spatial and temporal constraints for money flows. Through the temporary conversion of cash into digital form, money can travel almost instantaneously into many parts of the country. In Kenya such reduction is vitally important. Roads are often in poor condition outside of Nairobi, which makes it difficult to transfer money even during periods of stability. Money travelling physically is also at risk of being lost or stolen along the way, either by highway robbers or relatives transferring the cash. Many noted that this was a significant disadvantage of the other money transfer channels. [emphasis mine]

One of the greatest benefits of mobile cash, I would say, is this security. People can’t steal it from you, at least not in a conventional way. It has no physical mass, so it does not need to be transported like other goods.