EVALUATING THE EFFECT OF MOBILE MONEY ON FIRM PRODUCTIVITY IN AFRICA: A COMPARISON OF THE FORMAL AND INFORMAL SECTORS

We explore the relationship between firms' mobile money use and their productivity using a sample of 994 formal and 1.499 informal, predominantly micro-, small- and medium firms from Zambia, Mozambique and Zimbabwe. Our findings reveal a positive and statistically significant relationship between mobile money use and labor productivity for informal firms. The effect also appears to be stronger for female-led than for male-led informal firms, suggesting that mobile money could be a valuable tool to promote gender equity in Africa's informal sector. In contrast, for formal firms, the effect vanishes once all relevant controls are accounted for. Thus, for formal firms, mobile money may be insufficient to overcome the impediments of their business environments in Africa. Further, a complementary fsQCA reveals configurations of conditions that appear important for informal firms to truly benefit from the productivity enhancing potential of mobile money. The combination of founders' education, firms' location, their sector and their use of traditional bank accounts appear particularly crucial. The fsQCA findings give additional nuance to our regression results. Overall, our findings suggest that firms more exposed to transaction costs benefit more from mobile money.