Cash transfers and micro-enterprise performance: Evidence from refugee camps in Kenya

The effect of household cash transfers depends on how businesses respond to the demand shock and on the resulting effect on prices. Such market effects have been overlooked in the literature, which mostly focuses on direct impacts on households. We study the effect of a household cash transfer programme on the retail businesses operating in two refugee camps in Kenya, providing novel insights about how markets work in such contexts. Refugees receive a monthly mobile money transfer that can only be spent at registered businesses. Using matching methods, we compare registered and un-registered businesses, controlling for all variables considered in the registration process. We find no significant effect on prices. Registered businesses are more likely to survive and have higher revenues, profits, and labour productivity than the control group. The effects are large: revenues and profits of registered businesses are almost twice as high as the ones of un-registered businesses, with an average difference in profits of 500 USD between the two groups. Our research identifies a series of market failures that explain the results.