Assessing the Effects of the Mobile Money Service on Small and Medium Sized Enterprises: Study on EVC-Plus Services in Somalia

Abstract

The development of the mobile money services permits the businesses and the individuals to get access to the financial services and become part of the financial system. Access to the financial system is a key drive to business growth and entrepreneurial development in Somalia and in many parts of the world. The purpose of this study was to examine the contribution of the mobile money services to the growth of the small and the medium sized enterprises in Somalia. We applied dynamic capability theory to examine the factors that affect the business growth. This study employed cross sectional research design and used quantitative techniques to analyze the data of the study. The target population of the study was business owners that are in major cities in Somalia. A sample of 138 business categorized by trade, services and manufactures were studied. Descriptive and the inferential statistics were used to analyze the cross-section data collected from the various respondents. For regression analysis, Robust Least Squares (ROBUSTLS), is used to estimate the model parameters of the study. We rejected null hypothesis examined by this study and we found that all variables have a positive contribution that is different from zero and being statistically significant. The result shows that a one percent increase of the access to finance contributes to business grow of about (0.186%) while a (1%) increase sales growth, leads business to grow about (0.183%). The enhancement of the risk management by (1%) increases business grows to about (0.225%). The product development is a dominant variable that leads to business growth as (1%) increase of the product development, leads business to grow about (0.254%). These results indicate that mobile money service has a positive and significant influence to the business’s ability to access the finances. The increase of the mobile money adoption by (1%), causes access to the finance to increase about (13%). Mobile money also contributes to the sales growth as a (1%) increase of the use of the mobile money, causes sales to surge by (3%). Results show that a (1%) increase of the use of mobile money, leads the risk management to improve about (4%) and that a (1%) increase of the mobile money services, leads the product development to increase to about (9%). The stability of the data was examined using CUSUM test and we found that the data is stable. The model has no multicollinearity problem and the heteroskedasticity and the serial correlation were corrected.