E-Payment Technology and Business Finance: A Randomized Controlled Trial with Mobile Money

We conducted a randomized controlled trial with small and medium-sized enterprises in Kenya to estimate the causal impact of an 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 number of loans, as well as in the amount borrowed) by at least 50% (0.17 sd), likely due to 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.

JEL Classification: G00, G21, D22, D25, O33

Suggested Citation: Suggested Citation

Dalton, Patricio S. and Pamuk, Haki and Ramrattan, Ravindra and van Soest, Daan P. and Uras, Burak R., E-Payment Technology and Business Finance: A Randomized Controlled Trial with Mobile Money (November 25, 2022). CentER Discussion Paper No. 2022-031, Available at SSRN: https://ssrn.com/abstract=3481667 or http://dx.doi.org/10.2139/ssrn.3481667