Mobile money and financial inclusion: International evidence from informal sector enterprises in Asia and Africa

Mobile money (m-money)–fintech platforms that enable payments, transfers, and savings via mobile phones–has revolutionized the payment landscape in Africa, surpassing bank accounts in some regions. Studies have examined the effects of m-money on the financial inclusion of previously unbanked populations at the macro level. However, research on how fintech’s m-money enhances access to conventional banking services for microentrepreneurs and informal businesses remains limited. Using instrumental variable probit models and non-parametric methods on a cross-country sample from the World Bank’s informal enterprise surveys of sub-Saharan and Asian countries, this study finds robust evidence that m-money significantly increases informal enterprises’ transitions to deposit-based and credit-based financial inclusion. Heterogeneity analyses reveal that m-money significantly enhances microfinance credit access for informal enterprises in Asian countries compared with African countries. However, its effect on bank credit access is nearly the same in both regions, with statistically more significant coefficient estimates in the African countries. Furthermore, mechanism test analysis shows that the observed financial inclusion effect of fintech’s m-money stems from its influence on profitability and trade credit provision, which improves access to traditional financial services. An important policy implication is that fintech's m-money can serve as a precursor to broader formal financial inclusion in informal-sector enterprises.