Digital Financial Literacy and Technology Adoption Among Micro and Small Enterprises
DOI:
https://doi.org/10.64235/rrtyTaO5Keywords:
Digital financial literacy, technology adoption, micro and small enterprises, financial inclusion, complementarity, enterprise performanceAbstract
Micro and small enterprises (MSEs) adopt digital financial technologies, including mobile payments, digital lending, online banking and accounting applications, at rates well below their availability, and the gap is often attributed to access. This paper examines digital financial literacy, the knowledge and skill to use digital financial services effectively and safely, as a determinant of adoption that interacts with access, and traces adoption through to enterprise performance.A simulation of 900 MSEs generates adoption from a logistic model with literacy, access and their interaction, and performance from adoption and its interaction with literacy. Literacy has the largest coefficient (2.04), access the second (1.14) and their interaction is positive (1.42): adoption rises from 21% among low-literacy, low-access enterprises to 51% with high literacy alone, 38% with high access alone and 84% with both. Adoption raises performance (0.27), and the gain is larger for literate adopters (interaction 0.12), since literacy governs how well the technology is used after adoption. The paper argues that literacy and access are complements, that literacy programmes yield their largest return where access already exists, and that literacy continues to matter after adoption by determining the depth and safety of use. Implications for development programmes, providers and research design are derived.
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