Determinants of household income diversification in Uganda

Abstract

Income diversification is widely recognized as a crucial strategy for enhancing livelihoods, building resilience, reducing poverty, and promoting inclusive economic growth. This study examined the factors influencing income diversification in Uganda, defining it as earning from two or more sources and analyzed a sample of 2,795 observations from the UNHS of 2019/2020 with logistic regression model based on weighted data to ensure representativeness. The sample indicated that 66.5% of households relied on more than one income sources. The findings demonstrated that age group (ages 18–30) have lower odds of diversifying their income compared to other age groups (AOR = 0.10, P=0.006) Conversely, households headed by widows or widowers exhibited higher odds of diversification than those headed by married monogamous individuals (AOR = 6.90, P=0.049) Completing primary education was linked to higher odds of diversification compared to having no formal education (AOR = 4.50, P=0.006), and Wealthy households were associated with higher odds than counterparts (AOR = 4.50, P=0.01). Households in the Western region experienced lower odds of diversification compared to those in the Central region (AOR = 0.30, P=0.011) No access to credit had lower odds than counterparts (AOR = 0.10, P=0.007). Lastly, households that engaged in joint or consultative financial decision-making had higher odds of diversification than those where decisions were made individually (AOR = 3.50, P=0.022). In conclusion, income diversification in Uganda is primarily shaped by factors (such as wealth and marital status), human capital (including age and education levels), geographic location, and financial access (encompassing access to credit/loans and inclusive decision-making). Other factors such as asset ownership or fundamental demographics like gender or household size don’t necessarily determine income diversification. Recommendations include strengthening financial inclusion, investing in basic education, supporting vulnerable groups like widows, and promoting inclusive household decision-making through financial literacy programs.