Informal firms' adoption and use of mobile money under uncertain times: Evidence from Burkina Faso

This paper investigates how uncertainty driven by political instability or Covid-19 crisis affects mobile money adoption and use by the informal businesses in Burkina Faso. Notwithstanding the pervasive prevalence of informal sector in developing countries and despite the fact that mobile money has been shown to be a formidable tool for financial inclusion, there has been very little empirical work exploring the drivers of adoption and usage among unregistered businesses. Besides, most of the extant studies precede covid-19 and were conducted under stable contexts. Therefore, our study aims at filling this gap by taking into account the impact of the Covid-19 shocks as well as recent political turmoil in Burkina Faso culminating in two Coups d'Etat in 2022. We consider three waves of business survey data from a quasi-experimental opening of mobile money merchant accounts that we initiated in March 2021. Using Linear Probability and random effects models, our findings indicate that, after controlling for business owner and business level characteristics, security, is an important factor driving the adoption and usage of merchant accounts. However, we find that the temporary closure of businesses during the covid-19 affects negatively the adoption of merchant account while it has a positive impact on mobile money usage, particularly for payment reception, activities in the trade sector or allowing remote transactions. Overall, this study is in line with policymakers' agenda worldwide to improve financial inclusion among private sector businesses by using mobile technologies. While conducted in the specific context of political and covid-19 crises, our results provide policymakers and governments with a mapping of drivers of merchant account adoption and usage, thus acting as a springboard to increase financial inclusion for small and medium enterprises.