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Paga — Impact Brief

Introduction

Paga, a Nigerian mobile money platform, delivers a number of financial services such as person-to-person money transfers, transfers to bank accounts, bill payments, airtime purchases, and remittances, all from a customer’s linked eWallet or bank account or, for customers without a bank account, through a Paga agent in their neighborhood.

Because mobile money facilitates the safe storage and transfer of money, Paga’s service has the potential to increase net household savings and facilitate timely transfer of small amounts of money during negative shocks, enabling vulnerable households to be more resilient.[1] Furthermore, by expanding the geographic reach of informal risk-sharing networks, Paga should allow more efficient risk sharing.[2]

Transaction costs, including the fees of having and using a bank account, as well as travel costs to get to the nearest bank, have been shown to be a significant barrier to the use of traditional banking institutions. To achieve financial inclusion, accessibility and affordability of financial services is critical, but distance to the nearest bank ranks as one of the primary barriers to using traditional banking institutions. Paga’s agent network provide a cheaper and more effective means of reaching poor and remote customers, especially in Northern Nigeria where financial exclusion is highest and expanding bank branches is unsustainable.

Use of GIF Funds

GIF’s initial investment in Paga was designed to grow its user base, promote the Paga agent network, and invest in product innovation.

Impact to Date

During 2019, Paga had over 14 million unique users using the platform. Paga decreases the transportation and time costs of receiving money from family and friends and paying bills, which mitigates individuals needing to miss housework, childcare, and work responsibilities. Average cost savings for rural Paga customers compared to using traditional financial institutions are estimated to be $24 per person annually due to the difference in costs between placing a transaction at the nearest bank versus with the nearest Paga agent.

We estimate that during the period of GIF’s investment, from 2018 to 2020, Paga generated $45 million in discounted net social benefits using information on the cost-savings incurred by rural customers. Accounting for the fact that other investors also invested in Paga, we estimate that $4.8 million in discounted net social benefits was generated by GIF’s investment alone. GIF’s investment in Paga has returned over $1.11 in net social benefits to date for each dollar invested by GIF.[3]


[1] Jack, William, and Tavneet Suri. 2014. “Risk Sharing and Transactions Costs: Evidence from Kenya’s Mobile Money Revolution.” American Economic Review, 104 (1): 183-223. DOI: 10.1257/aer.104.1.183
[2] The risk‐reducing benefits could be mitigated due to issues of observability and moral hazard when parties are separated by large distances.
[3] Refer to GIF (2020) for more details on how the social benefits and GIF’s return on investment were calculated.