Determinants of Digital Financial Inclusion for Micro and Small Enterprises to improve their Performance: The Case of Adama City

Abstract

Digital financial inclusion involves offering digital financial services to the financially excluded and underserved populations, through a mobile phone or other digital devices to increase access to digital financial services. The development of digital products and services will likely to support greater financial inclusion, especially for lower income communities and small firms such as Micro and Small Sized Enterprises (MSEs). Therefore, the aim of this study is to examine the determinant factors affecting Digital Financial Inclusion for MSE. A mixed research approach and an exploratory research design as well as a multinomial logistic regression model are applied. In addition, one-time cross-sectional view and distinguished data are used, based on their sources: namely supply-side and demand-side. Both primary and secondary data collected are processed and analyzed using application software, narrative discussion and thematic analysis. The finding of the study indicates: In one hand, financial usage regularity, third party delegation and SIM card issue have a positive effect on the existing financial usage and digital usage frequency, digital usage interest, Tele birr usage, actors’ digital know how and zero balance account have a negative effect on existing financial usage. In the other hand, the qualitative analysis of the study reveals that, unless the usage of ‘digital way alone’ and its frequency, the magnitude of ‘both digital and analogue’ and also the usage regularity issues are promising. The study suggests for concerned body to come up with a digital legal framework as a solution to maintain the work process of digital financial service between financial service providers and MSE sectors.