Mobile Money Use and Entrepreneurs' Access to Trade Credit in the Informal Sector

ABSTRACT Using the 2016 FinAccess Household Survey of Kenya, this article investigates the relationship between mobile money use for transactions and trade credit based on a sample of entrepreneurs who operate informal businesses. Our main findings are as follows. Informal firms that use mobile money for business transactions are more likely to receive goods and services on credit from suppliers and offer goods and services on credit to customers. The effect of mobile money use on the probability of regularly receiving goods and services on credit is higher among entrepreneurs with lower income, those without access to informal finance, and those with bank accounts. The effects of mobile money use on the likelihood of offering credit to most or all customers are higher among high‐income entrepreneurs, those with bank accounts, and those with access to informal loans. Mobile money use affects entrepreneurs likelihood to offer credit to customers because it enables them to receive credit from their suppliers. Transaction costs matter in the relationship between mobile money use and the likelihood of receiving or offering credit.