nep-mfd New Economics Papers
on Microfinance
Issue of 2019‒11‒18
two papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. Transparency and Financial Inclusion : Experimental Evidence from Mobile Money (revision of CentER DP 2018-042) By Dalton, Patricio; Pamuk, H.; Ramrattan, R.; van Soest, Daan; Uras, Burak
  2. The Effect of Mobile Money Usage on Borrowing, Saving, and Receiving Remittances: Evidence from Tanzania By Askar Ismailov; Albert Benson Kimaro; Hisahiro Naito

  1. By: Dalton, Patricio (Tilburg University, Center For Economic Research); Pamuk, H. (Tilburg University, Center For Economic Research); Ramrattan, R.; van Soest, Daan (Tilburg University, Center For Economic Research); Uras, Burak (Tilburg University, Center For Economic Research)
    Abstract: Electronic payment instruments have the potential to spur the transparency of business transactions and thereby reduce information frictions. We design a field experiment to understand whether e-payments facilitate the financial inclusion of SMEs in developing world and to study adoption barriers. We encourage a random sample of Kenyan merchants to adopt a new mobile-money payment instrument and find that the decision to adopt is hampered by the combination of information, know-how and seemingly small transaction costs barriers. In addition, we nd that business owners who are more averse to transparency are more reluctant to adopt. Sixteen months after the intervention, we observe that treated firms have better access to finance in the form of mobile loans. The impact on financial access is more pronounced for smaller establishments, which also experience a considerable reduction in sales volatility. We conclude that e-payments can help un-collateralized firms become transparent and get financially integrated.
    Keywords: SME Finance; Transparency; payment technologies; Lipa Na M-Pesa
    JEL: D22 G00 G21 O33
    Date: 2019
  2. By: Askar Ismailov; Albert Benson Kimaro; Hisahiro Naito
    Abstract: This study examines the effect of the use of mobile money services on financial behavior using data from Tanzania. We estimate the causal effect of the use of mobile money on borrowing, receiving remittances, and saving by applying a two-stage least squares estimation using the shortest distance to the border of areas with multiple mobile phone networks, which is a proxy of accessibility to a mobile network, as an instrumental variable. We find that when a household experiences a negative shock, non-users of mobile money increase borrowing, while mobile money users do not. Further, the use of mobile money increases the probability of saving in mobile money savings accounts and of receiving remittances, while it decreases the probability of saving in less liquid assets such as livestock. In contrast, we find that the effect of the use of mobile money on receiving remittances is the same for those who experience a negative shock and those who do not. These evidences suggest that the use of mobile money increases the receipt of remittances regardless of negative shocks and changes the saving portfolio, so a household can prepare for negative shocks. Hence, a household that uses mobile money does not need to increase borrowing in the face of a negative shock. Consistent with this interpretation, the negative shock does not decrease the livelihood of the mobile money users while it decreases the livelihood of non-users.
    Date: 2019–11

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