Mastercard Center for Inclusive Growth and The Financial Access Initiative (FAI) at New York University has announced the launch of The Small Firm Diaries, a global research initiative that will provide unprecedented insight into the financial lives of small businesses across six countries in Sub-Saharan Africa, Latin America and Southeast Asia. The study will examine how small firms manage the adoption of digital financial services, with a focus on women-led businesses.
The study will shed light on how small business owners across the world manage their financial decision making amidst uncertain and volatile economies, by collecting detailed quantitative and qualitative data insights from firms employing between 1 and 20 non-family workers in Nigeria, Ethiopia, Uganda, Colombia, Indonesia and Fiji.
While there has been a great deal of research on informal family-run “microenterprises,” and more professionalized “medium-sized” firms, the needs of small firms are not yet well-understood.
In Sub-Saharan Africa, small firms play a crucial role in economic development and job creation and insight is needed to understand the unique challenges faced by them in order to create sustainable solutions for their longevity and growth. According to The World Bank, it is estimated that SMEs are responsible for 77 per cent of all jobs in Africa and as much as half of the GDP in some countries.
The research initiative, supported by the Center, aims to provide financial service providers, policymakers, and practitioners with knowledge and recommendations to address barriers to adoption of digital financial services.
“We must understand how small enterprises work in order to develop interventions that reduce inequality and increase financial security amongst financially underserved communities,” said Natasha Jamal, Regional Director, Middle East and Africa, with the Mastercard Center for Inclusive Growth. “This first-of-its-kind research will provide on the ground insights into what barriers and opportunities exist for small firms to adopt digital financial services and participate in an inclusive economy.”
“Small firms are by far the biggest employer in low and middle-income economies. Despite decades of statistical research, fundamental questions remain about why some grow, and some stagnate,” said Jonathan Morduch, Executive Director of the Financial Access Initiative and Professor of Public Policy and Economics at New York University.“ Our aim is to go into the field and try to understand small firms from the bottom-up, by listening closely to how entrepreneurs and workers make choices on their own terms.”
“Just as household financial diaries have been crucial to understanding the needs of low-income households around the world, and the barriers to achieving household financial security, the kind of detailed financial information provided by diaries is needed to understand the choices that small firm owners make and the real barriers to growth they face,” said Timothy Ogden, Managing Director at the Financial Access Initiative. FAI and its partners are working closely with local organizations that will be involved in the research to obtain country-level research and ethics approvals in each of the six countries that will host the study.
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