Digital Finance, Enterprise Formalization, and Firm Performance in Sub-Saharan Africa: Evidence from Mobile Money Expansion

Background Digital finance is also regarded as a significant means to help companies in emerging economies formalize and improve their performance. Mobile money in Sub-Saharan Africa has reduced transaction costs and expanded access to financial services, yet there is scant evidence on its impact on business formalization and outcomes. Methods We used firm-level data from the World Bank Enterprise Surveys and matched it with country-level datasets from the Global Findex Database, World Development Indicators, Worldwide Governance Indicators, and mobile network coverage data. Panel regressions were used to investigate the impact of digital finance on enterprise formalization and firm performance, controlling for firm-specific characteristics, macroeconomic conditions, and institutional factors. We conducted the robustness tests on the other specifications and sub-sample tests. Results The review indicates that increased mobile money penetration enhances the likelihood that an enterprise will formalize and improve firm performance, as reflected in increased sales and productivity. These advantages are greatest among micro and small companies and women-managed companies, which highlights the inclusion-promoting role of digital finance. These impacts are enhanced by strong institutional quality and robust digital infrastructure, and mitigated to some extent by weak regulatory environments. Conclusions Our results provide strong evidence that digital finance promotes formalization and performance in Sub-Saharan Africa. The developmental benefits of digital finance can be enhanced by policies that promote interoperability of mobile money, improve the quality of digital infrastructure, and strengthen regulatory quality. The article contributes to the research by associating digital financial inclusion with formalization outcomes and firm performance, using multi-source data and rigorous empirical procedures.