Determinants of financial inclusion in Uganda

Abstract

The study examines socio-economic determinants of financial inclusion in Uganda. We use a probit model estimation strategy to analyze data from the Fin-Scope survey 2013 of Uganda for a sample of 3401 households. The dependent variable financial inclusion is measured using two indicators, that is: ownership of a bank account and ability to access and use credit. Our findings indicate that the determinants of financial inclusion in Uganda include: an individual’s gender (being male), the level of education (that is; secondary and post-secondary training), employment status of an individual (self- employment and employed for a wage), a shorter distance to the nearest formal financial institutions, living in the urban set up, the region (that is; Eastern and Northern region), and being literate. Based on the findings, the study recommends policies targeting special categories of people, for example females and those living in the urban areas together with those from the Eastern and Northern region. Among the policies suggested include: those that emphasize increased agent banking especially in rural areas, more usage of mobile payments, diversification of financial providers, and also make major reforms in the existing financial institutions. These policies should be in position of narrowing down gender gaps and urban-rural gaps in accessing formal financial institutions. The level of education and literacy has also been found to influence financial literacy, therefore there is need for policies that strengthen and develop education systems.