An empirical analysis of the effect of financial inclusion on poverty reduction in Uganda

Abstract

The main objective of this study was to investigate the impact of financial inclusion on poverty reduction in Uganda focusing on mobile money as a channel for financial inclusion. Interest in mobile money effects on poverty reduction was motivated by the fact that between 2012/13 and 2016/17, poverty levels increased from 19.7% to 21.4% as noted in the recent Uganda National Household Survey 2016/17 conducted by UBOS. At the same time, within the same period mobile money registered the highest penetration levels. The relationship between financial inclusion and poverty reduction was estimated using data from the Financial Inclusion Dataset conducted by the Intermedia Survey Institute 2016. Financial Inclusion surveys are national geographic and demographic surveys on the demand for, access and usage of financial services. The logit model was estimated for this study which was tested for specification using the link test and it was found to be properly specified. The results were interpreted basing on the odds ratio which revealed that Age, financial inclusion proxied by having active mobile money account and bank account, region and marital status were found to have significant effect on poverty at different levels of significance. The study recommended spread education inform of sensitization amongst the excluded population