Impact of disbursing microfinance loans on mobile money accounts

Microcredit recipients, and the poor more generally, often report that barriers to productive investment include temptation spending and the pressure to share money with family, with the latter being particularly problematic for women. This study will use a randomized experiment in partnership with the Ugandan branch of the microcredit organization BRAC to evaluate the economic effects of expanding the financial access of female microcredit borrowers through the provision of mobile money accounts. It will test the behavioural hypothesis that the integration of mobile money accounts and microfinance loans increases the economic benefits of the loans by facilitating business investment and saving. By keeping business funds separate from household funds both mentally and physically, mobile money may create behavioural impediments to acting in impulse and thereby facilitate saving, while also serving to hide money from others.

If treatment through mobile money accounts were shown to cause increased business activity and profits among microcredit recipients, it would underline the importance of taking into account behavioural and social constraints in the design of financial services. The study would provide evidence of how tailoring financial services to the needs to women in developing countries can increase the benefits women get from the service.