DFSP country case studies

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Digital Finance and Gender Gap in Enterprise Performance: Evidence from Kenya
(African Economic Research Consortium, 2024-07-17) Lemma, Tesfaye T.; Mlilo, Mthokozisi
The meteoric rise of digital financial services (DFS) in recent years has sparked the debate on whether they help financially constrained businesses to overcome their performance disadvantages. This study sought to examine whether female-owned enterprises, which tend to be more financially constrained than those owned by men, could curb their performance disadvantage attributable to financial constraints by using mobile money—a form of digital financial technology. Analysing data drawn from 317 firms subsumed in the 2018 World Bank Enterprise Survey on Kenya, we found that the use of mobile money for financial transactions reduces the performance disadvantage of female-owned firms. Using the Oaxaca–Blinder decomposition analysis, we further found that female-owned enterprises which use mobile money for financial transactions were able to cut circa 42.5% of their performance disadvantage induced by financial constraints. In additional analyses, we demonstrated that the influence of access to traditional financial services on the association between a firm’s use of mobile money and its performance outcomes is statistically insignificant. Overall, the findings highlight that women-owned firms could exploit mobile money technology to mitigate the gender gap in performance outcomes.