National identity ownership and financial inclusion in Uganda

Abstract

Ownership of a unique, legal identity is crucial for financial inclusion as majority of financial service providers in Uganda demand a national identity (ID) to satisfy the KYC (Know your customer) requirements. This study seeks to examine the effect of ownership of a national ID on financial inclusion in Uganda and make policy recommendations for broader national ID ownership to increase financial inclusion. Generally, the study argues that Uganda can boost financial inclusion by harnessing ID ownership among the unbanked. The study used the 2017 World Bank Global Findex data for Uganda and found that national ID ownership is statistically significant in predicting the likelihood of being financially included in Uganda with odds ratio of 1.56. The study also found that the socio-economic factors reduced the magnitude of relationship between ownership of a national ID and financial inclusion. With 95% confidence, national ID ownership, phone ownership, education, income quintile, and employment status statistically significantly predict the likelihood of being financially included in Uganda. The study further revealed that an individual who owns a national ID and owns a phone, has secondary school education, is in the richest 20% income quintile, and is in the workforce is more likely to be financially included compared to the same individual without a national ID although it was not statistically significant. The study recommends that national ID ownership policies should be integrated with other policies such as human capital development policies, increasing the income levels of individuals, increasing employment, and increasing phone ownership. The findings of this study were limited to the cross-sectional data in 2017 yet the national identification scheme in Uganda is not yet complete, further research can be considered to use the updated data in 2020 and years ahead