The researchers provide evidence that violence affects how people make financial decisions. Exploiting the quasi-random timing of several thousand violent incidents in Afghanistan, they 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 3 independent sources:
the entire universe of 5 years of mobile money transactions in Afghanistan
high-frequency data from a randomized experiment designed to increase mobile money adoption
a behavioral lab-in-the-field 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.
This research was funded under the Private Enterprise Development in Low-Income Countries (PEDL) programme.
Blumenstock, J., Callen, M., Ghani, T. Violence and Financial Decisions: Evidence from Mobile Money in Afghanistan. (2014) 47pp