Why Mobile Money Helps Businesses Differently Across Financial Systems

Digital finance is transforming how businesses make payments, manage transactions and obtain short-term financing. Yet the expansion of digital financial services does not necessarily translate into greater access to business credit. The relationship depends on the financial institutions, infrastructure and commercial arrangements surrounding individual enterprises.

A study titled Digital Financial Ecosystems and Trade-Related Working Capital Finance: Firm-Level Evidence from 39 Economies, published in the International Journal of Financial Studies, examines these relationships using data from 32,049 firms. Authored by Omar Arabiat, Sawsan Ismail, Heyam Sami Ahmad Alzobui and Ibrahem Melhem, the research investigates how digital finance, mobile money, insurance capacity and digital infrastructure relate to businesses' use of supplier credit and customer advances.

Conventional digital finance and insurance capacity consistently show positive associations with trade-related working capital financing, while mobile money produces weaker, less predictable results. Its relationship with business credit changes according to infrastructure development, financing arrangements and whether firms are entering credit relationships or already using them.

Digital Payments Are Expanding, but Business Credit Follows a Different Logic

Businesses depend on working capital to purchase materials, maintain inventories and bridge the interval between production and payment. When conventional financing is costly or unavailable, suppliers may allow delayed payments, while customers may provide advances against future deliveries.

These arrangements connect financing directly to commercial transactions. They can sustain production and strengthen supply relationships, but they can also redistribute financial pressure through delayed settlements, payment defaults and unequal negotiating positions.

Digital financial services potentially change how these obligations are administered. Electronic payments, financial institution accounts and debit cards can support transaction documentation and settlement, creating an environment in which businesses manage financial commitments through more developed payment channels.

The key question is whether these capabilities complement existing trade credit arrangements or reduce businesses' reliance on them. Mobile money introduces additional complexity because its usefulness may differ between economies with limited banking infrastructure and those offering several alternative financial channels.

To investigate these relationships, the researchers combined World Bank Enterprise Surveys with Global Findex, the Global Financial Development Database and World Development Indicators. Their final sample covers 39 economies surveyed between 2014 and 2020, including countries across Africa, Asia, Latin America and Europe.

The analysis distinguishes three dimensions: whether firms use supplier credit or customer advances, the percentage of working capital financed through these arrangements, and the financing share among firms already participating. This separation reveals differences that a single measure of business credit could conceal.

Formal Digital Finance and Insurance Show the Strongest Connections to Working Capital

The clearest finding concerns conventional digital finance, measured through digital payment use, financial institution accounts and debit card ownership. The researchers identify positive associations between this financial capability and trade-related working capital financing across all three principal statistical models.

In the linear specification, a one-standard-deviation increase in conventional digital finance is associated with a 3.55-percentage-point higher working capital share financed through supplier credit and customer advances, after accounting for the model's specified firm-level and macroeconomic characteristics.

The relationship challenges the assumption that stronger digital finance necessarily displaces financing arrangements between businesses. Formal payment systems and supplier credit appear capable of coexisting, with digital settlement and documentation offering plausible supporting functions rather than replacing underlying commercial obligations.

National insurance capacity presents an even stronger statistical association. Measured through nonlife insurance premiums and insurance company assets relative to economic activity, it is positively associated with working capital financing across the principal models.

The linear estimate indicates a 7.62-percentage-point higher financing share for a one-standard-deviation increase in insurance capacity. The researchers interpret this relationship through the potential relevance of risk-bearing institutions, counterparty monitoring and financial contracting capabilities.

However, the insurance measure describes national financial-system capacity rather than whether individual firms purchase insurance. The findings cannot establish that particular insurance products, underwriting technologies or risk-management services directly expand business credit.

Additional analysis incorporating regulatory quality and rule of law separately preserves the positive relationships for conventional digital finance and insurance capacity. Their consistency reinforces the statistical pattern without resolving whether unobserved national characteristics contribute to it.

Together, these findings place institutional capacity alongside payment technology in understanding enterprise finance. Digital transactions operate within commercial relationships shaped by payment obligations, financial risks and the capacity of institutions to support contractual arrangements.

Mobile Money's Financing Advantage Weakens as Digital Infrastructure Develops

Mobile money produces a considerably more complicated pattern. Its relationship with trade-related working capital financing changes as digital infrastructure expands, particularly when researchers examine whether businesses adopt supplier credit or customer advances.

At the lowest infrastructure levels examined, a one-standard-deviation increase in mobile money is associated with approximately a 10.9-percentage-point higher probability of adopting the financing channel. The estimated relationship weakens as infrastructure becomes more developed.

At higher infrastructure levels, the estimated association turns negative. However, the interaction between mobile money and infrastructure achieves only marginal statistical support at the 10% threshold in the principal adoption model and is not statistically supported in the percentage or fractional-share models.

The researchers interpret this pattern as consistent with mobile money becoming less distinctive where other digital payment and financial channels are widely available. Greater connectivity may support financial services generally while reducing the relative importance of any particular transaction mechanism.

The distinction between adopting financing and determining its intensity provides another important finding. Only 28.3% of surveyed firms use supplier credit or customer advances for working capital, while the average financing share across all firms is 10.08%.

Among 9,078 firms already using the financing channel, the mobile money–infrastructure interaction is effectively absent. The association observed among potential adopters therefore does not translate into a comparable relationship with financing intensity among existing users.

The study offers qualified support for this adoption-versus-intensity distinction. Commercial terms, production requirements and counterparty risks may influence how much financing businesses obtain once relationships exist, although the research does not identify their individual effects.

A further complication emerges when trade credit received and trade credit granted are examined separately. Both produce positive mobile money–infrastructure interactions, reversing the negative direction observed in the principal adoption analysis.

These outcomes reflect different commercial positions: receiving credit places a business on the borrowing side, while granting credit exposes it to customers' payment obligations. The reversal prevents any universal conclusion that improved infrastructure weakens mobile money's relationship with business credit.

Financial Inclusion Policies Face a More Complex Test Than Technology Adoption

The findings introduce an important distinction for financial-sector policy. Expanding digital payment access, strengthening insurance capacity and improving infrastructure cannot be treated as interchangeable interventions because their relationships with business financing differ.

For economies where conventional financial infrastructure remains limited, mobile money may provide a distinctive transaction channel. Where formal financial services and digital infrastructure are more developed, businesses may operate through several overlapping payment and settlement arrangements.

The research therefore supports differentiated assessments of financial ecosystems rather than a single approach to digital financial expansion. Policymakers need to distinguish between access to transaction channels and the commercial financing relationships those channels may support.

For businesses, the findings reinforce the importance of evaluating supplier credit alongside repayment conditions, settlement reliability, counterparty exposure and bargaining power. Greater reliance on trade-related financing does not automatically indicate stronger financial health or improved commercial performance.

The evidence nevertheless requires careful interpretation. The research uses observational, repeated cross-sectional data, meaning it cannot establish that changes in national digital finance or insurance capacity cause individual firms to obtain more credit.

Its final sample also reflects substantial reductions resulting from data availability requirements. Each represented economy contributes one economy-year observation, and the models cannot eliminate the influence of persistent, unobserved national conditions.

The weaker mobile money findings demand particular caution because statistical support varies across financing measures and model specifications. The contrasting results for credit received and granted further demonstrate how conclusions change when businesses occupy different positions in commercial transactions.

Future research using repeated country observations, transaction-level information and stronger causal identification could clarify which financial capabilities influence financing access, repayment conditions and credit relationships. Separating suppliers from buyers would provide additional insight into how financial risks move through commercial networks.