This paper examines how reduced transaction costs from mobile money (M-PESA) in Kenya have affected risk sharing among households. Using a panel dataset of Kenyan households collected over 18 months, the study finds that households with access to M-PESA experience less consumption decline during negative income shocks compared to non-users. The mechanism behind this effect is an increase in remittances received, in number, size, and diversity of senders. The study also shows that M-PESA users receive remittances more frequently and from a wider network of sources, which helps them smooth consumption during shocks. The results are robust to various tests, including falsification tests using data prior to M-PESA's introduction. The study highlights that M-PESA has significantly reduced the costs and risks associated with sending and receiving remittances, enabling better risk sharing. The findings suggest that transaction costs play a crucial role in determining the effectiveness of informal risk sharing mechanisms in developing countries. The paper also discusses the theoretical framework behind these findings, showing how reduced transaction costs can lead to better risk sharing and more efficient resource allocation. The study provides evidence that M-PESA has improved access to financial services, particularly for those in remote areas, and has had a significant impact on household consumption and risk sharing. The results are consistent with the idea that transaction costs are a key factor in the incompleteness of informal insurance mechanisms in developing countries. The study also notes that the expansion of M-PESA has been accompanied by a significant increase in the number of agents, which has further improved access to financial services. The paper concludes that M-PESA has had a positive impact on risk sharing in Kenya, particularly for low-income households, by reducing transaction costs and increasing the availability of remittances.This paper examines how reduced transaction costs from mobile money (M-PESA) in Kenya have affected risk sharing among households. Using a panel dataset of Kenyan households collected over 18 months, the study finds that households with access to M-PESA experience less consumption decline during negative income shocks compared to non-users. The mechanism behind this effect is an increase in remittances received, in number, size, and diversity of senders. The study also shows that M-PESA users receive remittances more frequently and from a wider network of sources, which helps them smooth consumption during shocks. The results are robust to various tests, including falsification tests using data prior to M-PESA's introduction. The study highlights that M-PESA has significantly reduced the costs and risks associated with sending and receiving remittances, enabling better risk sharing. The findings suggest that transaction costs play a crucial role in determining the effectiveness of informal risk sharing mechanisms in developing countries. The paper also discusses the theoretical framework behind these findings, showing how reduced transaction costs can lead to better risk sharing and more efficient resource allocation. The study provides evidence that M-PESA has improved access to financial services, particularly for those in remote areas, and has had a significant impact on household consumption and risk sharing. The results are consistent with the idea that transaction costs are a key factor in the incompleteness of informal insurance mechanisms in developing countries. The study also notes that the expansion of M-PESA has been accompanied by a significant increase in the number of agents, which has further improved access to financial services. The paper concludes that M-PESA has had a positive impact on risk sharing in Kenya, particularly for low-income households, by reducing transaction costs and increasing the availability of remittances.