The Impact of Mobile Money on Firm Performance in Kenya

Abstract

The research project focused on the impact of mobile money on firm performance in Kenya. It also dealt with the factors that influenced firms to adopt mobile money in their business transactions. The research project used secondary data of the World Bank Enterprises Survey for the years 2013 and 2018. Panel Data Analysis was applied using Stata Software. The research progressed by reorganization of both the dependent and independent variables to facilitate data analysis. Diagnostic tests such as normality, multicollineality and heteroscedasticity were conducted to ensure reliability and validity of analyzed data. The data was analyzed using logit model following the results of normality test. In addition, fixed effect model was adopted following the Hausman test. Both correlation and regression analysis were administered on the variables that were presented. Consequently, the association between firm performance in sales as dependent variable and independent variables had contrasting relationships. While sales performance and small firms had significant negative correlation of -0.55, the association of sales performance and medium firms as well as large firms were positive at 0.23 and 0.46 respectively. Further, the association between mobile money and credit access was positive at 0.13. Moreover, the association of mobile money and manager with over 10 years’ experience was positive at 0.02 while that of female manager was also positive at 0.06. The regression results suggested that the coefficient of mobile money on sales revenue was positive at 0.131. The effect was, however, not statistically significant. Furthermore, the main factors that influenced firms to adopt mobile money were innovation such that firms that innovated and those that accessed credit had a higher probability of adopting mobile money than those that did not at 0.752 and 0.814, respectively. Similarly, the main reason why some firms did not adopt mobile money were large amount involved that mobile money threshold could not accommodate. Therefore, a major policy recommendation for the mobile money regulator would be to enhance the amount transacted through mobile money so that firms could transact their business that involve large amounts. The study identified mobile money adoption by the government ministries and parastatals as an area for further studies.