Electronic Payment Technology and Business Finance: A Randomized, Controlled Trial with Mobile Money

Patricio S. Dalton (), Haki Pamuk (), Ravindra Ramrattan, Burak Uras and Daan van Soest
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Patricio S. Dalton: Department of Economics and CentER, Tilburg University, 5037 AB Tilburg, Netherlands
Haki Pamuk: Wageningen Economic Research, Wageningen University and Research, 6706 KN Wageningen, Netherlands

Management Science, 2024, vol. 70, issue 4, 2590-2625

Abstract: We conducted a randomized, controlled trial with small- and medium-sized enterprises in Kenya to estimate the causal impact of an electronic payment (e-payment) technology on business finance. Using an encouragement design, we exogenously increased e-payment usage among a random subset of firms by relaxing adoption transaction costs and information barriers. Sixteen months after the intervention, we find that the e-payment technology increased access to mobile loans (in the number of loans as well as in the amount borrowed) by at least 50% (0.17 standard deviation), likely because of the reduction of information asymmetries brought by an increase in digital transactions. We find no effect of the e-payment technology on sales and profits, but we do find a reduction of sales volatility and precautionary investment, especially for smaller firms. This suggests that mobile loans help smaller firms cope with short-term negative shocks. We provide a stylized model of business finance that rationalizes these findings.

Keywords: SME finance; financial integration; mobile money; e-payments (search for similar items in EconPapers)
Date: 2024
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Working Paper: Electronic payment technology and business finance: A randomized, controlled trial with mobile money (2024)
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