Mobile money, inclusive finance and enterprise innovativeness: an analysis of East African nations

Abstract

This study explores the relationship between firms’ adoption of mobile money services and their innovativeness in the East African countries of Kenya, Uganda and Tanzania. We argue that the use of mobile money by firms in these countries has had a positive indirect impact on their innovativeness by reducing the credit constraints they face. Using data available from the World Bank Enterprise Surveys, we adopt a sequential modelling approach, first estimating the impact of mobile money use on credit constraints and then estimating the impact of credit constraints on binary indicators of product, process and organisational innovation. Innovation is shown to depend on whether or not the firm is credit constrained, and the probability of being credit constrained is shown to depend on the choices made about the use of mobile money. We find that the indirect impact of mobile money on innovation performance is greater for small firms than for medium or large firms.