Violence and Financial Decisions

Many poor countries are plagued by violence, which destroys capital, deters investment, changes economic decision-making, and adds to uncertainty about the future. This project examines the relationship between violence and financial decisions in Afghanistan. The study identifies a negative correlation between violence and mobile money usage, by employing three different methods and datasets: (1) comparing the universe of mobile money transactions in Afghanistan and administrative records for violent incidents, (2) running a randomized experiment, and (3) using financial survey data from nineteen of Afghanistan’s 34 provinces. Results show that individuals experiencing violence prefer cash to mobile money. Researchers also speculate that this relationship is predominantly due to concerns about future violence, and that robust formal financial networks face severe challenges in conflict environments.