Poverty and Migration in the Digital Age: Experimental Evidence on Mobile Banking in Bangladesh

Mobile banking technology makes it cheaper and easier to move money across distances. Against a background of rapid urbanization in Bangladesh, we estimate the impact of mobile banking in a sample of "ultra-poor" rural households paired to relatives who migrated to find jobs in the capital. The study shows that diffusion of the gains from urbanization is constrained by barriers to remitting money. The technology substantially improved rural economic conditions by better connecting villagers to urban migrants, an idea that contrasts with (and complements) innovations like microfinance that focus on rural self-employment. Participants were trained on how to sign up for and use mobile banking accounts in a randomized encouragement design costing less than $12 per family. Active use of accounts increased substantially, from 22% in the rural control group to 70% in the rural treatment group, and urban-to-rural remittances increased by 30% one year later (relative to the control group). For active users, rural consumption increased by 7.5% and extreme poverty fell. Rural households borrowed less, saved and invested more, and fared better in the lean season. The rate of child labor fell, and we find weak but positive evidence that schooling improved. Rural health indicators were unchanged. Migrants, however, bore costs. They were slightly more likely to be in garment work, saved more, and were less likely to be poor. However, migrants actively using mobile banking reported worse physical and emotional health.