Violence and Financial Decisions: Evidence from Mobile Money in Afghanistan

Tuesday, 18 October, 2016
Blumenstock, Callen and Ghani (2015) provide evidence that violence affects how people make fi nancial decisions. Exploiting the quasi-random timing of several thousand violent incidents in Afghanistan, the authors show that individuals who are exposed to violence are less likely to adopt and use mobile money, a new financial technology, and are more likely to retain cash on hand. This effect is corroborated using data from three independent sources: (i) the entire universe of 5 years of mobile money transactions in Afghanistan; (ii) high-frequency data from a randomized experiment designed to increase mobile money adoption; and (iii) a behavioral lab-in-the-fi eld experiment with experienced mobile money users. Collectively, the evidence highlights an economic cost of violence that operates through individual beliefs, which is large enough to impede the development of formal financial systems in conflict settings.