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The study found that “cash is king.” E-money’s share of transactions was less than 6 percent, compared to more than 94 percent for cash. M-PESA is still primarily used to send money home, usually from urban to rural; cash out almost always happens quickly, often the same day the remittance is received. Respondents did not appear to use M-PESA as de facto savings accounts, but the service was an important part of their coping strategies for unusual large expenses, particularly hospital bills.....the study draws on concepts from economic sociology to show that Kenyans’ use of M-PESA is “embedded” in preexisting social and spatial relations and that M-PESA usage patterns mimic to some degree those of cash. It also examines the length of the “e-money loop” (number of times an e-money unit is transferred before it is cashed out), the transaction fees M-PESA users pay in order to identify cost and price implications of current and potential uses. The Distance/Purpose Framework suggests that e-money providers have a virtually untapped potential “sweet spot,” in terms of cost and price, serving the business market segments provided that issues of trust can be overcome.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.