Digital Financial Services and the Growth of Micro, Small and Medium Enterprises: Evidence from Ngara District, Tanzania
Year: 2026
Type: article
Abstract: This paper examines whether the growth of micro, small and medium enterprises in a remote cross-border district depends on the mere presence of digital financial channels or on the intensity with which entrepreneurs actually use them. The study is novel in three respects. First, it provides district-level evidence from Ngara, a rural district bordering Rwanda and Burundi, a setting that national surveys of financial inclusion do not disaggregate. Second, it evaluates mobile money, electronic payments, online banking and agency banking jointly within a single analytical framework instead of treating each channel in isolation, which allows their contributions to be compared directly. Third, it integrates the supply-side logic of financial intermediation theory with the demand-side logic of the technology acceptance model and, on this basis, distinguishes empirically between the availability of a financial access point and its active use. The analysis draws on a cross-sectional survey of registered enterprise operators selected through stratified random sampling across three trading wards. Enterprise growth is captured by a multidimensional composite index that combines perceived changes in sales, profit and employment, and its determinants are estimated through multiple regression with demographic and business controls, supported by specification, multicollinearity and heteroscedasticity diagnostics. The results reveal a clear usage hierarchy: mobile money and electronic payments are embedded in daily commercial practice, whereas online banking remains marginal. The usage intensity of mobile money, electronic payments and online banking is each positively and significantly associated with enterprise growth, with effects of broadly similar magnitude, whereas the proximity of a banking agent shows no independent association once usage is taken into account. The principal conclusion is that utilisation, rather than physical availability, is the channel through which digital finance supports enterprise growth. The study thereby refines the financial intermediation argument by showing that intermediation benefits materialise only when access is converted into routine use. In practical terms, the findings indicate that financial inclusion policy for peripheral regions should shift from expanding agent networks towards measures that stimulate active use, notably digital and financial literacy training, lower transaction charges, more reliable connectivity and targeted support for women entrepreneurs, whose enterprises recorded weaker growth.
Authors: Peter E. Kulwa, Aurelia Ngirwa Kamuzora
Institution: Mzumbe University
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W7225856498