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

Author

Listed:
  • 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)

  • Ravindra Ramrattan
  • Burak Uras

    (Department of Economics and CentER, Tilburg University, 5037 AB Tilburg, Netherlands)

  • Daan van Soest

    (Department of Economics and CentER, Tilburg University, 5037 AB Tilburg, Netherlands)

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.

Suggested Citation

  • Patricio S. Dalton & Haki Pamuk & Ravindra Ramrattan & Burak Uras & Daan van Soest, 2024. "Electronic Payment Technology and Business Finance: A Randomized, Controlled Trial with Mobile Money," Management Science, INFORMS, vol. 70(4), pages 2590-2625, April.
    • Handle: RePEc:inm:ormnsc:v:70:y:2024:i:4:p:2590-2625
    DOI: 10.1287/mnsc.2023.4821
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