The many dimensions of mobile money: Evidence from Bangladesh


Published 21.09.18
Photo credit:
UNSGSA/Ismael Ferdous

Mobile money makes transfers easier, increases rural consumption and reduces poverty, but places pressure on migrant workers to increase remittances

Early theories of economic development focused on economic growth driven by rural to urban migration. In the early vision, workers would move to industrial jobs in cities, escaping lives trapped in low-productivity farming (Lewis 1954). However, persistent rural poverty placed attention back on development interventions designed to directly improve living conditions in rural areas (Bardhan 1984). Too many people were being left behind in the development enjoyed by cities and ‘urban bias’ was seen as a problem. To address this, economists turned their attention from cities to villages (Lipton 1977).  

Technology and rural development: Mobile money

With the advent of new technologies such as mobile money, a complementary possibility arises: the urban-to-rural movement of labour combined with the technology-enabled low-cost movement of resources back to rural areas to reduce rural poverty and share the gains of urban growth. 

Mobile money is a mobile phone-based service that allows for person-to-person transfers, savings, and, to a more limited extent, purchases through a digital platform. In some countries, borrowing is also possible.  The technology is potentially transformative. 

A recent report by the consulting firm McKinsey and Co. asserts: “For providers of digital financial services, mobile money can be a gateway into huge and largely untouched markets. Digital finance has the potential to reach over 1.6 billion new retail customers in emerging economies and to increase the volume of loans extended to individuals and businesses by $2.1 trillion.”  

Early work using the rollout of mobile money systems in Kenya shows how mobile money can help households insure against risk and reduce poverty (Jack and Suri 2014, Suri and Jack, 2016). A study by Suri and Jack published in Science shows that mobile money helped to lift almost 200,000 Kenyan households out of poverty.   

The study: Bangladesh

Our work (Lee et al. 2018) follows both sides of the remittance equation – senders and receivers – providing insight into the case of Bangladesh, a country facing the challenges of extreme rural poverty alongside rapid urbanisation. The United Nations projects that the population of Dhaka, the capital city, will grow to 27 million or more by the year 2030 (United Nations, 2016). It is currently home to a population of 18.3 million.

Bangladesh is also one of the global hotspots for digital finance. In 2014, 7% of Bangladeshi adults reported making or receiving a digital payment. Thanks to the rapid expansion of mobile banking services, the share rose to 34% in 2017 (Demirgüç-Kunt et al. 2018). Our study shows the potential gains brought by the new technology as well as the strains experienced by migrants trying to support their extended families.

The methodology

We designed a dual-site randomised controlled trial. The sites are Dhaka, Bangladesh’s economic and political hub, and Rangpur, a region in the northwest which is home to some of the country’s poorest and most vulnerable citizens. In our sample, approximately 50% of the residents lived in extreme poverty (as defined by the $1.90 threshold of the World Bank), while approximately 75% were poor (as defined by Bangladesh’s national poverty line). 

In Dhaka, we followed urban migrants originally from Rangpur. In Rangpur, we followed their extended families, restricting attention to a sample characterised as being ‘ultra-poor’ – i.e. lacking basic assets and education and earning little income. 

Mobile banking adoption: Training

Few members of the Rangpur sample had adopted mobile banking before the experiment, even though mobile banking services are available near to their homes. One large hurdle was caused by English-language menus on the telephone interface, creating a barrier for the largely illiterate population. Still, the residents could see the value of the technology, and they understood how to use it after training. 

The main experimental intervention involved training a randomly-assigned group in Rangpur (and their relatives who had migrated to Dhaka) on the use of the technology. The control group did not receive training or help. We gave participants in the training hands-on experience with sending remittances, provided translated menus, and, as needed, facilitated account sign-ups. The training cost about $12 per family. 


We followed rural households and migrant workers using a baseline and endline survey, as well as collecting administrative data from our partnering service provider, bKash, on use of the mobile money platform. The result was a large increase in mobile money usage, from about 20% to 70% of the sample.

Rural households

The intervention led to large impacts for rural households who received the training:

  • Extreme poverty fell and consumption increased by 7% on average, and more during the local lean season known as the monga
  • These effects were driven by a 30% increase in remittances from migrant workers to rural households associated with use of the bKash platform, representing a substantial transfer of resources. 
  • Rural households also borrowed less and were more likely to save. 
  • Investment increased, as seen in a rising rate of self-employment and increased out-migration for work.  

The results show that strengthening rural-urban links through mobile banking brought substantial new resources into rural areas and helped residents cope with seasonal difficulties.


The impacts on migrants to Dhaka show that there are trade-offs for these rural gains:

  • Migrant workers saw reductions in poverty.
  • However, migrants were more likely to report declines in physical and emotional health if signed up for bKash, consistent with pressures to work longer hours and increase remittances enabled by the mobile banking technology.  

Concluding remarks

The movement of people and money suggests the possibility of broadening ways to improve rural conditions.  We show that rural conditions can be improved by facilitating mechanisms to connect urban and rural areas financially. 

In a rapidly changing and urbanising world, there is a risk that the rural poor may be left behind, but technologies such as mobile money offer promise for bridging the urban-rural divide and improving the inclusiveness of growth. However, increasing the volume of remittances puts extra strain on migrants. Moreover, for all the possibilities of technology, traditional challenges faced by low-skilled wage workers – especially relating to poor labour and health conditions – remain. 


Bardhan, P (1984), Land, Labor, and Rural Poverty: Essays in Development Economics, New York: Columbia University Press.

Demirgüç-Kunt, A L, Klapper, D, Singer, S, Ansar, and Hess, J (2018), The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution, Washington, DC: World Bank. 

Jack, W and Suri, T (2014), “Risk sharing and transactions costs: Evidence from Kenya's mobile money revolution”, American Economic Review 104(1): 183-223.

Lee, J, Morduch, J, Ravindran, S, Shonchoy, A and Zaman, H (2018), "Poverty and Migration in the Digital Age: Experimental Evidence on Mobile Banking in Bangladesh", working paper. 

Lewis, W A (1954), “Economic development with unlimited supplies of labor”, Manchester School 22: 139-91.

Lipton, M (1977), Why Poor People Stay Poor: Urban Bias in World Development, Cambridge, MA: Harvard University Press.

McKinsey & Company (2018), Mobile money in emerging markets: The business case for financial inclusion

Suri, T, and Jack, W (2016), “The long-run poverty and gender impacts of mobile money”, Science 354(6317): 1288-1292.

United Nations (2016), Urbanization and Migration in Bangladesh, Dhaka: UNFPA Bangladesh Country Office.