Does mobile money use increase firms’ investment? Evidence from Enterprise Surveys in Kenya, Uganda, and Tanzania

Asif Islam, Silvia Muzi and Jorge Rodriguez Meza

Small Business Economics, 2018, vol. 51, issue 3, No 10, 687-708

Abstract: Abstract Private investment can be an important engine of economic growth in East African countries that are plagued with adverse economic conditions, despite recent growth rates. Against this backdrop, there has been substantial penetration of mobile money, moving beyond simple person-to-person exchanges towards adoption by private firms. This study explores whether there is a relationship between firm adoption of mobile money and firm investment. Using firm-level data that are nationally representative of the private sector in three East African countries—Kenya, Tanzania, and Uganda—a positive relationship is found between mobile money use and firm’s purchase of fixed assets. This relationship is attributed to reduced transaction costs, increased liquidity, and increased credit worthiness associated with the use of mobile phone financial services. The finding is largely driven by small- and medium-sized enterprises (SMEs).

Keywords: Mobile money; Financial development; Investment; Firms; SMEs; Africa; E22; G2; L25; O16 (search for similar items in EconPapers)
Date: 2018
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Working Paper: Does mobile money use increase firms'investment ? evidence from enterprise Surveys in Kenya, Uganda, and Tanzania (2016)
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DOI: 10.1007/s11187-017-9951-x

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