Small Businesses and Digital Financial Services

Micro, small, and medium-sized enterprises (MSMEs) are the backbone of vibrant and dynamic economies. But they are sometimes hard for financial institutions to identify because of the methods they use to conduct their transactions. As a result, many MSMEs do not get access to financing and financial products that are designed specifically to support businesses. Identifying these MSMEs and addressing their needs can be very advantageous for digital financial service providers.

This report discusses predictive data models to help a mobile network operator in Sub-Saharan Africa identify MSMEs in its market and better understand how to serve them. It shows that MSMEs can be accurately identified with a high degree of statistical confidence. Moreover, the analytic method can be used to segment those MSMEs into more granular business profiles. The segmentation algorithm is driven by patterns of how MSMEs use mobile money. The emerging segments differ in their business characteristics and their financial needs.