EMANES Working Paper No 76
Financial constraints are top ranked as barriers to firms’ energy efficiency, but to what extent can a country’s specific financial innovation help mitigate these restraints? This study examines whether firms’ use of mobile money can affect the efficiency of their energy use in Kenya. Using firm-level data from the World Bank Enterprise Survey and applying fixed effect regression analysis, this is the first firm-level study to examine the relationship between mobile money and energy efficiency. The results report that mobile money users can significantly reduce their energy intensity by increasing their financial accessibility and stimulating technological progress. However, firms with access to both mobile money and traditional financial services do not leverage their eased financial constraints for improving their energy efficiency – unless they invest in technological information and new product innovation. Heterogenous analysis finds that the negative effect is more pronounced amongst SMEs, firms that operate in non-manufacturing sectors and businesses with top female managers. The results are subject to a set of stringent robustness checks to address potential endogeneity and selection bias concerns. The findings from this analysis have important policy implications for the Kenyan authorities seeking to maximise mobile money benefits and reduce energy consumption in the business sector.
