Impact of mobile money on SME productivity: evidence from East Africa

Abstract

Mobile money is a mobile-phone-based used to access financial services that can work as a simple deposit account or transfer funds for many purposes, like pay suppliers, safely and quickly across people and business. Mobile money has promoted major transformations in businesses in East Africa, also reducing geographical financial restrictions of population. Introducing of new technologies can be an important engine of economic growth in East Africa countries that experience long periods of instable economic growth, with fast changeover between recession and growth, despite of recent growth rates. Against this backdrop, there has been substantial penetration of mobile money, which can be one of the tools to help firms gain productivity and make those countries have a more sustainable growth through the years. As a result, the purpose of this study was to investigate the relationship between mobile money use by small and medium-sized enterprises (SMEs) in three countries of East Africa (Kenya, Tanzania and Uganda) and gains in productivity. In order to evaluate the impact of mobile money technology on productivity the relation of annual sales of last fiscal year per employee, using a regression estimations. Understanding the relationship between mobile money technology and initiatives to gain productivity in East in Africa is important, as countries in this region are underdeveloped, including their banking system, and less inclusive. Due to this, technology can be a facilitator in accelerating development and enhance population inclusion and wealth. Prior research related to the use of mobile money in East Africa countries has focused to different correlations about the use of it in economy and firms, however, there is a lack in literature on the effect of such use in productivity. Results of this study shows that explanatory variables use and purpose of use of mobile money when analyzing adoption of this technology and the intensity of use, are not statistically significant to the dependent variable revenue by employee. Nevertheless, some controllable variables, such as have a line of credit or a loan from financial institution, experienced power outages, have foreign ownership, use e-mail, have quality certification, spend on research and have top manager experience in firms’ sector were statistically significant.