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

Jean N. Lee
World Bank, 1818 H St NW, Washington, DC 20433

Jonathan Morduch
New York University Robert F. Wagner Graduate School of Public Service, 295 Lafayette St, New York, NY 10012

Saravana Ravindran
Lee Kuan Yew School of Public Policy, National University of Singapore, 02-08 Li Ka Shing Building, 469B Bukit Timah Road, Singapore

Abu Shonchoy
Florida International University, 11200 SW 8th Street, Miami, FL 33199

Hassan Zaman
World Bank, 1818 H St NW, Washington, DC 20433

Abstract/ Executive Summary:

Rapid urbanization is reshaping economies and intensifying spatial inequalities. In Bangladesh, we experimentally introduced mobile banking to very poor rural households and family members who had migrated to the city, testing whether mobile technology can reduce inequality by modernizing traditional ways to transfer money. One year later, for active mobile banking users, urban-to-rural remittances increased by 26 percent of the baseline mean. Rural consumption increased by 7.5 percent, and extreme poverty fell. Rural households borrowed less, saved more, sent additional migrants, and consumed more in the lean season. Urban migrants experienced less poverty and saved more but bore costs, reporting worse health. (JEL D31, G21, G51, I32, O15, O16, O18)

Keywords: Poverty, Migration, Digital Age, Experimental Evidence, Mobile Banking, Bangladesh, World bank

Location: In Bangladesh

Start Date: 00-04-2015

End Date: 00-05-2015

Program Area: Socio-economic and Policy

Commodity: Banking, Livelihood, Poverty, Accountability

Objectives:

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

Methodology:

The bKash mobile banking service has experienced rapid growth in accounts since its founding, and our study took place during a window before the service had fully penetrated the Gaibandha market. Since bKash was already available as a commercial product, we were not in a position to experimentally introduce it from scratch. Instead, we used an encouragement design in which adoption was facilitated for part of the sample. The intervention that took place in April and May 2015 consisted of a 30–45-minute training about how to sign up for and use the bKash service. This training was supplemented with basic technical assistance with enrollment in the bKash service. If requested, our field staff assisted with gathering the necessary documentation for signing up for bKash and completing the application form. To minimize the risk of experimenter demand, we recruited fully local field staff and surveyors to implement the experiment, including research assistants. The intervention aimed to reduce the main barriers to the adoption of mobile banking. Most important, mobile banking services in Bangladesh use Unstructured Supplementary Service Data (USSD) menus that allow mobile banking services to be used on any mobile device. The menus, however, are in English, creating a large hurdle for poorer villagers in Gaibandha with only basic levels of numeracy and literacy just in Bangla (Bengali). The intervention responded by teaching the basic steps and protocols of bKash use, along with providing participants with practical, hands-on experience, sending transfers at least five times to establish a degree of comfort (see online Appendix F for the training materials used). Within the treatment group, we also cross randomized (i) whether migrants were approached before or after their sending households were (whether they were first or second movers) and (ii) whether migrant-household pairs received a prosocial marketing message that emphasized the benefits of the technology for their family as well as for themselves as individuals. While recruitment was coordinated so that pairs were visited within a short time of each other, they were not primed in any way to transact with each other. We also cross randomized whether households received a midline survey that measured willingness to pay that was priming respondents to think of bKash or priming respondents to think of cash. This paper focuses on the first randomization, that of assignment of a household-migrant pair to the bKash training intervention and control. The training materials were based on marketing materials provided by bKash, simplified to increase accessibility. Since the phone menus are in English, we also provided menus translated into Bangla (Bengali). The encouragement only included training on how to use mobile money. We took care to keep the treatment simple and narrow. The treatment did not include a text message between the rural and urban households. The recruiting teams did not explicitly coordinate, but all visits were completed within two months. The households were not primed to transact with the other member of the pair. The household survey data collected in 2014/2015 and 2016 were combined with administrative data from bKash to estimate impacts.

Source of Information: American Economic Journal: Applied Economics 2021, 13(1): 38–71

Article Link (Online Journal): https://doi.org/10.1257/app.20190067

Funding Source:

Total Budget (Tk.) :

Achievement/Findings:

Rapid urbanization is one of the defining economic forces of our time. The movement of people to cities, together with the more efficient movement of money, suggests a possibility for improving rural conditions and reducing spatial inequality. We show that rural conditions can be improved by facilitating mechanisms to connect urban and rural areas financially. The study here is unique in following two (paired) groups simultaneously, one in rural Gaibandha in Northwest Bangladesh and the other in Dhaka division, site of the country’s capital and home to factories offering industrial jobs. The migrants in Dhaka are the adult children of families in Gaibandha. Given the existence of the mobile banking network, the intervention we designed and tested was relatively inexpensive, costing under $12 per family for a 30–45-minute training intervention on how to use the bKash mobile banking service on a mobile telephone (carried out with family members in both urban and rural sites). The short intervention sharply increased take-up of bKash from 22 percent in the rural control group to 70 percent in the rural treatment group—itself a substantial result. The high take-up rate is partly a function of the time and place. First, nearly all families have members with mobile telephones, but adoption of mobile banking technologies was constrained by the use of English-language menus. In response, the intervention included teaching the basic steps and protocols, providing hands-on practice by sending transfers five times to establish a degree of comfort, sharing translations of menus into Bangla (Bengali), and, if needed, facilitating the sign-up process. Second, the experiment was started when mobile money was still relatively new in Bangladesh, especially in poorer rural areas like Gaibandha. The nature of the service and the use of English made the technology intimidating to villagers with limited education. Still, the experiment shows that the barriers were not insurmountable. As a result, the setting provided a window (now closing, as bKash and its competitors penetrate widely) that made it possible to identify the impact of the new technology. At a mechanical level, the movements of people and money lead to broader questions about the nature of households. One common definition holds that a household is a group that lives together and regularly eats together. In the digital age, though, a son or daughter living in a city hundreds of miles away (or even in another country) may be in regular communication and participate in their parents’ economic lives in a day-to-day or week-to-week way. The growing speed and ubiquity of mobile banking transfers, together with relatively cheap communication, suggests that researchers may need to begin revising traditional notions of the household.

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