Adoption of Digital Payment Technologies and Access to Finance among MSMEs in Ethiopia: Exploratory Evidence

Digital payment technologies reduce cost of payments, increase security, and increase access to savings and insurance networks for households and firms. Additionally, they enable firms to maintain verifiable, digital transaction histories that can facilitate access to credit from formal financial institutions. This is a significant advantage for micro, small and medium enterprises (MSMEs), for whom lack of finance is a serious obstacle. However, take-up of digital payment technologies among MSMEs in developing countries continues to be weak. This project will investigate the challenges in adoption in the Ethiopian context by conducting a survey of MSMEs in urban centres, holding focus group discussions with entrepreneurs and analysing the survey data using regression analysis.

The researchers will rely on two sets of primary data. First, they will conduct a quantitative survey of roughly 700 MSMEs based in various urban centres of the country, operating in both manufacturing and services sectors. They will collect survey information on: i) characteristics of the enterprise, ii) characteristics of the owner iii) operations of the enterprise iv) digital and mobile technologies used, v) purposes of use, for instance, payment of utility bills, salary payment to employees, sending and receiving money vi) perceptions concerning digital technologies, and vii) sources of finance. Second, they will conduct qualitative surveys with randomly selected MSMEs, conducting Focus Group Discussions (FGDs) with about 60 firms with a group of six individuals in each group. One of the groups will be of mixed gender, whereas the other will solely involve female-led MSMEs. The main focus of the FGDs will be to gain a deeper understanding of challenges that the MSMEs encounter in adopting digital technologies, their understanding of these technologies and perceptions they have towards them. 

By identifying factors affecting adoption of digital payments among MSMEs, this study will provide important inputs in informing policymaking related to take-up of such technologies. The findings from the study will also reveal whether the challenges that women entrepreneurs face in adopting the technologies vary, thus contributing to policymaking on financial inclusion. Lastly, the study will provide initial insights on how adoption of digital payment technologies paves the way for firms to access credit, both from traditional formal sources and digital credit sources.


Eyoual Demeke

Policy Studies Institute

Asha Sundaram

University of Auckland

Tewodros Tesemma

Policy Studies Institute