Converting Electronic-Payment Expansion into SME Growth in Libya: Developing and Testing a Digital Trust and Payment-Capability Model

Abstract

Libya's electronic-payment system expanded quickly during 2025. Yet more terminals and transaction value do not automatically create SME growth. This study develops a Digital Trust and Payment-Capability Model. It explains how payment access becomes sales, resilience, records, and finance. The paper uses a structured secondary-evidence design. Official Libyan indicators are combined with Libya-focused studies and public international experiments. Central Bank data show payment value rose from LYD 136 billion in 2024 to LYD 389 billion in 2025. Point-of-sale terminals almost doubled to 150,205. However, Libya lacks matched firm data linking payments with business growth. The model was tested through theory-pattern matching and evidence congruence. Results support three findings. First, infrastructure expansion raises possible use, but trust determines repeated use. Second, payment capability converts transaction access into business value. This capability includes onboarding, record use, reconciliation, integration, and data-based finance. Third, growth effects are conditional. A Kenyan randomized trial found at least 50 percent more mobile-loan access, but no average sales effect. French merchant data showed 8.3 percent higher card-sales value for contactless adopters during shocks. These results reject an infrastructure-only strategy. Libya should combine interoperable payments with dispute resolution, transparent fees, merchant training, bookkeeping tools, and responsible lending. The proposed model gives policymakers a testable framework. It also provides researchers with a practical survey and pilot design. Future work should link merchant transactions with panel measures of sales, employment, profits, and survival.