Mobile Money, Risk Sharing, and Educational Investment: Panel Evidence from Rural Uganda

We examine the impact of the rapidly expanding mobile banking service “mobile money” on rural households' ability to smooth investment in schooling after a negative shock. We find that a negative shock induces a 9.3‐percentage point decrease in per school‐age child educational expenditure for households who do not use mobile money compared to an 8.3‐percentage point decrease for households that have adopted mobile money. The underlying mechanism is an increase in remittance receipt and the diversity of senders owing to the reduction in transactions cost provided by mobile money. We show that our results are robust to alternative mechanisms. We use the expansion in mobile money agent network as an exogenous variation in access to mobile money.