Informations et ressources scientifiques
sur le développement des zones arides et semi-arides

Innovations for Poverty Action

Titre : The Role of Mobile Banking in Expanding Trade Credit and Business Development in Kenya

Région /Pays : Kenya

Date : 2011-

Résumé
Trade credit, which is usually provided by up-stream suppliers to down-stream firms, can help small businesses to purchase non-perishable goods for resale and free up resources for other uses. However, provision of trade credit may be limited by high transaction costs, up-stream liquidity constraints, and concerns over repayment. In Kenya, researchers designed an evaluation to measure the impact of a new method of extending trade credit facilitated by mobile banking and inventory management technologies on small business development. However, the evaluation was canceled after a series of challenges in rolling out the credit product.

Présentation
Access to finance is a critical constraint for small businesses everywhere. Credit provided by up-stream suppliers to down-stream firms (“trade credit”) can relax the constraints on capital. Trade credit can help small businesses, like retail shops and kiosks, to purchase non-perishable goods for resale and free up resources for short- and long-term uses. However,the provision of this type of credit may be limited by high transaction costs, up-stream liquidity constraints, and concerns over repayment. As trade credit agreements in low-income countries usually involve small amounts, judicial systems are unlikely to enforce repayment of loans in court. Without a system to distribute small loans in an economically feasible manner and manage repayment, suppliers have little incentive to extend this service. This project evaluates a new method of extending trade credit facilitated by mobile banking and inventory management technologies and will shed light on its potential to foster small business development in a developing country context.

Taille de l’échantillon  : 1,200 retailers in Kenya

Innovation for Poverty Action (IPA)