Mobile Telephony, Social Networks and Credit Access: Evidence from MSMES in Kenya

View/ Open
Date
2018-04-17Author
Mdoe, Idi Jackson
Kinyanjui, George Kariuki
Metadata
Show full item recordAbstract
Access to credit by micro, small and medium enterprises is key for growth
and employment. However, it is hindered by information asymmetry. We investigated the effect of mobile telephony and social networks (group networks) on the
probability of access to credit by Micro, Small and Medium enterprises in Kenya.
Our analysis employed cross-sectional data, the 2016 FinAccess Household Survey
infographics sheet. The analysis assumed a limited dependent variable modelling.
Our analysis revealed that micro-, small- and medium-sized enterprises with owners
who currently have mobile banking, mobile money and group participation, respectively, have 8.8, 6.05 and 1.97 percentage points higher chance of receiving formal
credit. In terms of informal credit, the analysis revealed that below five groups
participation in an extra group by the MSME owner increases the probability of accessing informal credit by 6.26 percentage points. As policy measures, our analysis
implies that owners of MSMEs should participate in groups and take up mobile
money and banking to further their MSMEs chances of accessing formal and informal credit. In addition, the findings imply that money lenders should create strategies to tap MSMEs reputation created by groups and mobile telephony.