Funding for this project was provided by the UK Foreign, Commonwealth & Development Office, awarded through IPA's Peace & Recovery Program.

The Challenge

The COVID-19 pandemic’s disruption to economic activities was particularly strong for people living in low-income countries. Low-income governments had less institutional and financial capacity to respond to the crisis by expanding social protections, as many other countries did. As a result, low-income households faced more severe economic shocks and were less able to adjust their work behaviors to adhere to social distancing guidelines. This was particularly present in Ghana, which had limited restrictions on mobility and economic activity after COVID-19 lockdowns were lifted.

Mobile money could offer an opportunity to address these challenges. In other crises, mobile money has been a transparent and scalable approach to social protection, although open questions have remained surrounding the effectiveness of these transfers on immediate, humanitarian outcomes like food security. Cash transfers also had the potential to reduce a household’s need for work, enabling increased social distancing. Nonetheless, mixed evidence¹ raised policymakers’ concerns that the transfers would decrease social distancing during the pandemic if households with increased cash used it for in-person transactions or to expand household enterprises.

The Evaluation

In partnership with IPA Ghana, researchers conducted a randomized evaluation to measure whether mobile money transfers to low-income households in Ghana would improve household well-being and increase social distancing during the COVID-19 pandemic. Using the existing nationally representative Ghana Socioeconomic Panel Survey from 2018, researchers identified 1,508 low-income households with access to mobile money accounts. Households were randomly assigned to either a comparison group that received one transfer of 90 Ghanaian Cedis (GHC) (equal to 65 percent of weekly food expenditure and 45 percent of weekly income) or to a recipient group that received eight transfers of 90 GHC every one to three weeks. 

Surveying the transfer recipients before, during, and up to two years after the transfers, researchers explored effects on consumption, food security, labor supply, income, social distancing, and psychosocial well-being, among other outcomes. 

Results

The mobile money transfers had a positive impact in the short- and medium-term, moderately increasing food expenditure, household financial well-being, and income. Households that received transfers saved more money, spent approximately 8 percent more on food, and earned about 18-30 percent more income than the comparison group. The transfers had no effects on psychological well-being, and the announcement of seven upcoming transfers during the first transfer did not cause people to change their behaviors in anticipation of receiving those future transfers. Though positive effects on income eight months after the final transfer, with participants reporting 24 percent higher income than the comparison group, they did not persist two years after the intervention. Moreover, two years later, negative effects were found on household consumption, driven by urban households in Accra, and on the psychological well-being of household heads, particularly for female-headed households.

Mobile money transfers had mixed effects on social distancing. While recipients reported staying home more, this may reflect overreporting of socially desirable behaviors. Researchers conclude that the transfers did not decrease adherence to social distancing protocols, as policymakers feared they would. 

The researchers also found that cash transfers generally did not move recipient policy attitudes or substitute for pandemic-era coping mechanisms, such as beliefs that the pandemic’s effects had been exaggerated or increased religiosity. The transfers may have even reduced recipients’ concerns that the economy would be negatively impacted by the pandemic. 

These findings provide overall mixed support for cash transfers as a response to pandemic support for low-income households in low-income countries. Immediate positive effects on outcomes such as consumption—as over 40 percent of the transfer was spent on food—helped alleviate pandemic shocks without decreasing social distancing. However, more research is needed to determine the mechanisms behind and potential solutions for the long-term negative effects on consumption and psychological well-being.

Sources

^1. Banerjee, Abhijit, Faye, Michael, Krueger, Alan, Niehaus, Paul, Suri, Tavneet, 2020. Effects of a Universal Basic Income During the Pandemic. UC San Diego technical report

Crosta, Tommaso, Dean Karlan, Finley Ong, Julius Rüschenpöhler, and Christopher R. Udry. Unconditional cash transfers: A Bayesian meta-analysis of randomized evaluations in low and middle income countries. No. w32779. National Bureau of Economic Research, 2024.

Kaur, Supreet, Sendhil Mullainathan, Suanna Oh, and Frank Schilbach. "Do financial concerns make workers less productive?." The Quarterly Journal of Economics 140, no. 1 (2025): 635-689.