Pooling Together or Pulling Apart? The Effect of Mobile Money on Standard of Living Inequality in Kenya

Over the past decades, mobile money (MM) has revolutionized access to financial services via mobile phones, especially for the financially excluded in developing countries. While existing research highlights MM's role in reducing income inequality at the crosscountry level, little is known about its impact on other dimensions of inequality at the subnational level. To close the research gap, this study investigates the effect of increased MM use on the inequality in standard of living in Kenya. Employing a methodological triangulation of quantitative analysis (System Generalized Method of Moments (System GMM)) and qualitative analysis (fuzzy-set Qualitative Comparative Analysis (fsQCA)), this paper explores whether and how increased MM use interacts with socioeconomic factors to impact the inequality. The results of System GMM show that although increased MM use has no direct effect, the two-way interactions of MM and a range of socioeconomic factors are associated with the decreased inequality. The results of fsQCA further reveal that increased MM use narrows the inequality in socioeconomically developed regions, but not in less developed regions. Notably, this study documents a three-way configuration with strong explanatory power that increased MM use, in combination with high levels of economic development and traditional financial development, leads to the reduced inequality. These findings underscore the conjunctural and contingent nature of MM in equitable socioeconomic development and generate important policy implications.