How Transformational Mobile Banking Optimizes Household Expenditures: A Case Study from Rural Communities in Mexico

Abstract

This article presents the results of a quasiexperimental impact evaluation of a mobile banking pilot project led by the Mexican government in a context that portrays the financial inclusion challenges in Mexico and Latin America: highly dispersed populations in rural communities that lack access to a financial system and telecommunication services. The research questions that drive this study are: Do mobile banking and mobile telephony have an impact on households’ expenditures? Specifically, what categories of expenditure are affected? The propensity score matching methodology was used to assess the impact on households’ expenditures by category (e.g., education, transport, energy, communications, etc.). Results show that mobile banking can reduce spending on communications and public transport, and the main benefits in terms of spending come from the reduction of people’s local commuting expenses. Likewise, evidence indicates that a major share of spending reduction is transformed into savings in bank accounts. Finally, the case study presents relevant lessons for mobile banking policy alternatives to promote financial and digital inclusion in rural communities.