Why Receiving Digital Payments Helps Firms Overcome Credit Constraints Globally

Using data from nearly 49,000 firms in 101 countries, the World Bank and University of Edinburgh study shows that firms receiving electronic payments face fewer credit constraints because digital transactions create reliable information for lenders. The benefits are strongest for small firms and in low-income economies with weak credit systems, where electronic payments help reduce information gaps and improve access to finance.

Produced by researchers at the World Bank’s Development Economics Global Indicators Group, in collaboration with the University of Edinburgh, the study explores how electronic payments are changing firms’ access to credit around the world. Using data from the World Bank Enterprise Surveys covering nearly 49,000 firms in 101 economies, the paper focuses on a simple but powerful question: can digital payments help firms overcome credit constraints? The authors argue that electronic payments do more than speed up transactions. By creating verifiable digital records of sales and expenses, they generate information that lenders can use to better judge whether a firm is creditworthy, especially where formal financial records are weak or missing.

How widespread are credit constraints?

The analysis shows that credit constraints remain a major obstacle for firms globally. About 15 percent of firms are fully credit constrained, meaning they cannot obtain external finance even when they need it, and another 16 percent are partially constrained. These problems are most common in low-income countries and among small, young, and less productive firms. At the same time, electronic payments are already widely used: more than 80 percent of firms receive or make payments electronically, and such payments account for over half of total sales and purchases. However, firms that struggle most to access credit are also the least likely to use electronic payments, and when they do, they use them less intensively. These firms tend to be smaller, less innovative, and less likely to have audited financial statements or an online presence.

Why receiving digital payments matters

The study finds a clear link between electronic payments and credit access, but not all digital payments matter equally. Firms that receive payments electronically are significantly less likely to be fully credit-constrained. On average, receiving electronic payments reduces the likelihood of being fully credit-constrained by about 3 percentage points, a meaningful drop given how common credit constraints are. The share of sales received electronically shows a similar effect. In contrast, making electronic payments to suppliers has a much weaker relationship with credit access. This difference is important because incoming payments reveal sales and cash flows, which are central to lenders’ decisions, while outgoing payments provide less direct evidence of a firm’s ability to repay a loan.

Who benefits the most from electronic payments?

The benefits of receiving electronic payments are not evenly distributed. The strongest effects are found among firms that usually face the greatest information barriers. Small firms, start-ups, low-productivity firms, and businesses without audited accounts gain the most from using electronic payments. For these firms, digital transaction records help compensate for the lack of formal financial statements or long credit histories. The study also shows that electronic payments are especially valuable in countries with weak credit information systems, low levels of financial development, and large informal sectors. In such environments, traditional sources of credit information are limited, and electronic payments act as an alternative way for lenders to assess firm performance.

What this means for policy and growth

Electronic payments can ease credit constraints mainly by reducing information gaps between firms and lenders, not by changing firms’ underlying risk. This helps lenders better identify viable firms and allocate credit more efficiently. The findings suggest that promoting electronic payment adoption, alongside stronger digital and financial infrastructure, can support financial inclusion and private sector growth. For developing economies in particular, encouraging digital transactions can be a practical way to improve access to finance for smaller and more opaque firms, helping them invest, grow, and contribute more fully to economic development.