Digital Financial Services (DFSP)

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Mobile Money Consumption Taxes: What are the Distributional Impacts
(AERC, 2025) Sekumbo, Karia; Ringo, Noela; Manda, Constatine
The mobile money industry has conferred numerous benefits to consumers from all segments of income distribution. Given the rapid ascent of the industry, policymakers have grappled with its effective taxation. A key reason underlying this is a poor understanding of the distributional effects. This policy brief investigates a controversial tax that was instituted on mobile money withdrawals in Tanzania in 2021. Almost immediately after its introduction, transaction volumes across mobile money platforms plummeted. Tanzanian policymakers revised the tax multiple times before eventually removing it altogether. Given this U-turn, we investigate how the tax affects different consumer groups. Our findings revealed that salaried workers in urban areas as being more likely to reduce consumption of mobile money services. These results suggest that less wealthy respondents in rural areas with fewer substitutes were forced to contend with this tax while wealthier urban respondents substituted into different financial services. To relieve the rural poor of the onerous burden of this tax, we suggest revising the burden on wealthier segments to ensure that the incidence of taxation leaves them indifferent to contending with the tax as opposed to substituting into different financial services.
Mobile Money a Catalyst for Women Empowerment in Rural Rwanda
(AERC, 2025) Botha, Rosemary; Kamninga, Tony; Tuyisenge, Methode
It is widely known that financial inclusion is key in achieving development at macro and micro level. Rwanda has over the years made great strides in financial inclusion with 93% of the adult population being financially included. Mobile money is the biggest driver of financial inclusion in Rwanda with the uptake among women being relatively lower (84%) compared to men (90%). The fifth Sustainable Development Goal identifies the achievement of gender equality and women empowerment as one important pillar in the achievement of sustainable development. With the high coverage of digital financial inclusion through mobile money and its current structure in the country, it is unknown whether agency is improved for women with access to mobile money. Digital technology has gained prominence to support women empowerment by changing the way business is done and creating better employment opportunities. The current operation of mobile money provides a reliable platform for transactions, but more reforms could be done to provide even better benefits to its clients. This brief discusses results investigating the effect of mobile money access on women empowerment in Rwanda.
The Fintech Ecosystem and Financial Inclusion: Evidence from Kenya
(AERC, 2025) Kodongo, Odongo
The purpose of this policy brief is to explain the role that the fintech (financial technology) ecosystem could play in facilitating financial inclusion in Kenya. The country has witnessed tremendous growth in the fintech subsector in recent years. It had at least 385 registered fintech firms/startups by July 2022 operating in various subspaces such as savings and credit, foreign exchange and cryptocurrency, insurance, and micro/neo-banking. Alongside these developments there has been a steep growth in financial inclusion, with FinAccess surveys documenting growth in formal financial services usage between 2006 and 2021 from 33.2% to 85.9% among men, and from 20.5% to 81.7% among women. Therefore, understanding the linkages between fintech and usage of formal financial services is of interest to policymakers. This study explored linkages using FinAccess data for 2016 and 2021 and documented several interesting findings.
Finance for Her: Engendering Financial Services and DFS in Rwanda
(AERC, 2025) Munyegera, Ggombe Kasim
Rwanda has achieved remarkable progress in financial inclusion and the development of digital financial services. Women are, however, disproportionately less included in formal financial services. While the overall gender gap in financial inclusion narrowed from four percentage points in 2016 to one percentage point in 2020, women have lower access to formal financial services, including ownership of bank and mobile money accounts. The DFS inclusion rate increased from 46% of the adult population in 2016 to 66% in 2020. However, there is a clear gender gap, with women having a lower DFS inclusion rate (62%) relative to their male counterparts (71%). Evidence-based measures to close the gender gaps in financial inclusion and DFS require research to understand their underlying drivers from the demand and supply sides of the financial sector.
Kenya Bidding Bye to Gender Inequality in Uptake of Digital Financial Services
(AERC, 2025) Tamba, Cox Lwaka; Murithi, Emmaculate Kathomi
Kenya is one of the countries in Africa where digital financial access has tremendously grown. Digitalization of the financial sector and the recent increase of Digital Financial Services (DFS) brings new opportunities to help build inclusive economic infrastructure that offers new services to marginalized populations and underserved communities worldwide. DFS can bridge the gender gap by increasing women’s financial autonomy and improving their economic participation.
Gender Lens to Digital Financial Services
(AERC, 2025) Ogwang, Ambrose; Kahunde, Rehema; Makika, Maya Dennis
Using Digital Financial Services (DFS) is key to increasing income-generating capacity, managing risks, lowering transaction costs, accessing credit, and increasing savings. However, women are less likely to be active users of mobile money (25% of women compared to 38% of men), have an account with a financial institution. Similarly, only 44 percent of females used mobile money services in 2019/20 relative to 60 percent of the males in Uganda. This implies significant challenges to overcome in ensuring inclusivity in the transformation to a digital society.
Impact of Mobile Money on Remittance Costs, Flows and Monetary Policy in Uganda
(AERC, 2025) Okelo, Jimmy Apaa
Remittances are a major source of financing for many low-income countries. High costs, however, have held back remittance inflows. Estimates show that between 5% and 15% of remittances are lost due to the high costs. Mobile Money has emerged as a powerful tool for cross-border money transfers. Since it was launched in Uganda in 2012, cross-border transfers through mobile money increased tremendously. Inward remittances rose to US$ 45.5 million in December 2021, up from just US$ 6.5 million in 2013. Among the available Mobile Money products (deposits, withdrawals, person-to-person (p2p), person-to-business (p2b), airtime and data purchase), inward and outward remittances grew fastest in 2016-2022 with annual growth rates of 96.4% and 158.3%. The increased use of Mobile Money is a reprieve to lower costs. Data from the World Bank shows that mobile money operators charge the lowest costs. In addition to enhancing competition, convenience, and security, mobile money also serves as a price discovery platform, enabling customers to initiate transactions directly from their handsets without the need to visit operators' outlets. This allows users to transact when exchange rates are favorable.
Empowering Ugandans: Strategic Roadmap for Financial Inclusion
(AERC, 2025) Nicholas, Okot; Elizabeth, Kasekende
Financial inclusion is crucial for sustained growth and development. However, it relies on an appropriate policy environment to ensure confidence. Digital Finance Services (DFS) are believed to enhance financial inclusion by promoting efficient access for the vulnerable. With a mobile money penetration rate of 51%, Ugandans are poised to benefit from digital financial innovations. The other DFS channels are internet banking, financial cards, e-commerce, and integrated payment platforms. In the last decade, Uganda has made significant strides to promote access, uptake, and usage of DFS to reach the unbanked share of the population. The goal of the National Financial Inclusion Strategy is to achieve 75% formal inclusion by 2028. This milestone seems ambitious, given Uganda’s financial infrastructure and social structure. This could be achieved if the country maintains the current trajectory of DFS adoption supported by an adequate policy and institutional framework aligned with global best practices to engender equity across the social divide. Do these policies lead to higher levels of financial inclusion?
Mobile Money Usage: A Comparative Analysis of Burundi with other African Community (EAC) Countries
(AERC, 2025) Ndayikeza, Michel Armel; Ndoricimpa, Arcade; Nyamweru, Jean Claude
Contrary to the general perception of the authorities interviewed for this study, the latest national survey on mobile money shows that its usage is very low in the country compared to most EAC countries (See Table). Over the period 2019 to 2020, only 11.4% of Burundians reported using their phone to pay, send or receive money. However, the demographics of users, notably gender composition, rural or urban area of residence, age, and education, are similar to those of other EAC countries.
Mobile Money for Increased Financial Inclusion in Burundi
(AERC, 2025) Ndoricimpa, Arcade; Nyamweru, Jean Claude; Ndayikeza, Michel Armel
Despite the importance of financial inclusion for economic growth and poverty reduction, the formal banking system rarely reaches the rural areas, and when it does, the cost of their services becomes a barrier for low income households and small businesses. The proportion of adult population that owned an account at a financial institution in Burundi was 12.5% in 2016. This is very low com-pared to the sub-Saharan African average of 34%. In addition, a national financial inclusion survey in Burundi in 2016 indicated that the ratio of account holders was five times higher in urban areas than in rural areas. Moreover, the survey indicated some gender and demographic differences in account ownership. The proportion of men owning an account was found to be almost double the women, while the proportion of young people (aged 18-29 years) owning an account was half of those aged 30 years and older. The ratio of account holders was found to vary depending on socioeconomic category; it was found to be 89.5% among state employees, 52.1% for private sector employees, 30.1% for traders and 5.3% for farmers. Contrary to what is observed in many other developing countries, women were found to constitute only 28.3% of microfinance institutions’ customers. It should be noted that the lack of access to formal financial services means that the poor and small businesses are limited in their ability to save, repay debts, and manage risk responsibly. It’s therefore imperative to find innovative models that help extend financial services to the financially excluded and the poor. It’s for this reason that digital financial services started in developing countries through mobile phones, in a bid to try bridging the financial inclusion gap. Mobile money technology has been introduced in Burundi as well, but the adoption and use are still low compared to other countries in the region.
Enablers and Inhibitors for Access and Usage of Digital Financial Services in Uganda
(AERC, 2025) Shinyekwa, Isaac M. B.; Mpuuga, Dablin; Nattabi, Aida K.; Bulime, Enock W. N
Financial inclusion (FI) and specifically access to affordable financial services is very critical in reducing poverty, income inequality as highlighted in Sustainable Development Goals 1, 5 and 10; and accelerating economic growth. FI is therefore important for Uganda like any other country. Women and rural Ugandans are proportionately more included in informal financial groups, whereas men and urban dwellers have more access and usage of formal financial services. The low level of formal FI in rural areas is partly explained by the high cost of providing financial services. Commercial banks are faced with lack of the incentives, information, and sometimes the ability to mitigate the risks of operating beyond urban markets or with low-income clients. Consequently, a significant portion of rural and low-income Ugandans remain financially excluded. In this regard, DFS such as MM emerge as one of the ways to bridge the financial access gap between the financially included and excluded. It is however noted that little is known in Uganda’s context concerning the critical enablers as well as inhibitors to access and usage of DFS. The policy brief summarizes findings from the study titled, “Leveraging Digital Services and Market Development for Financial Inclusion: The Case of Uganda”.
From Cash to Cashless: Leveraging the Potential of Digital Financial services in Rwanda
(AERC, 2025) Munyengera, Ggombe Kasim; Agnes, Mutuyimana; Seth, Kwizera; Precious, Akampumuza
Digital financial inclusion in Rwanda has grown from 46% of adults in 2016 to 66% in 2020. The nature of payments has also evolved, shifting from peer-to-peer transactions to more sophisticated ones, such as tax payments. According to the 2020 Finscope survey, 94% of commercial banks now offer some form of electronic payment. This progress notwithstanding, cash remains the preferred method of payment for groceries (98% of respondents), electricity (52%), medical fees (60%), education (44%), and personal spending (60%). Critical impediments to further DFS development and adoption include limited interoperability among platforms and services of different service providers and low levels of digital literacy. The mid-term evaluation of the National Strategy for Transformation revealed that only 24% of adults were digitally literate in 2021, less than halfway to the target of 60% by 2024. Low levels of awareness of DFS products, unreliable networks, especially in rural areas, and low levels of trust partially motivated by cyber insecurity are additional impediments to being addressed.
Disability is no Inability: Promoting Financial Inclusion and Digital Financial Services for PWDs in Rwanda
(AERC, 2025) Munyengera, Ggombe Kasim; Precious, Akampumuza; Seth, Kwizera
As financial inclusion rates rise to cover 93% of the adult population in Rwanda, one in four adults with disabilities has no access to either formal or informal financial services. People with disabilities have lower rates of mobile money account ownership (46%) compared to those without disabilities (59%). Overall rates of bank service usage, including accounts owned by others, were 30% among persons with disabilities and 37% among those without disabilities. Informal services are an inevitable option for people with disabilities whose usage rate is higher (17.9%) than among the rest of the population (14.9%), with substantial cost implications, especially regarding credit. Supply-side constraints include the physical inaccessibility of most financial institution and mobile network operator (MNO) premises, a lack of products tailored to the special needs of persons with disabilities (PWDs), disability-insensitive service delivery channels, and negative stereotypes and discrimination among some financial service providers.
Bank Competition, Digital Finance and Gender Parity in East Africa
(AERC, 2025) Wamalwa, Peter; Tiriongo, Samuel; Mulindi, Hillary
East African countries have vibrant telecommunications and banking sectors that have encouraged innovation and digitization of financial services. As a result, the cost of financial services has declined, making them more affordable and accessible to more segments of the population. The relevance of financial services has also improved, thereby contributing to increased uptake of services. Increased access and utilization of relevant financial services contributed to alleviating poverty, growth in incomes and gender parity in wealth. Despite East African countries having a competitive banking sector and strong synergy between telecommunications, banks, and financial technology firms, as well as achieving gains in digital financial inclusion, gender inequalities persist. Despite increasing competition in the banking sector, the gender gap in access to and utilization of financial services remains, particularly among women in rural areas, those engaged in farming or trade, and dependents, who together form the majority in East Africa. Women with lower educational attainment and those living in poverty have significantly less access to digital financial services compared to men.
Behavioural Biases: Driving a Wedge Between Access and Usage of Financial Services
(AERC, 2025) Osoro, Jared; Bundi, Davis; Kiplangat, Josea
The noticeable strides that Kenya has made in financial inclusion underpins the assumption that access automatically translates into usage of digital financial services. The plausibility of this assumption is questionable given that demand for financial services is influenced by behavioural biases. Individual behavioural heterogeneity and self-exclusion attitude account for the differences in financial decision making, with biases creating the wedge that inhibit the usage of financial services even when there are no limitations of access. The implication of such biases is that households have a predisposition of making financial decisions that leads to less optimal welfare outcomes.
Digital Financial Services in Tanzania: Plight for the Poor
(AERC, 2025) Mwighusa, Dennis; Diyamett, Bitrina
There are glaring currently inclusion gaps associated with gender, social and economic status, and geographical location in the provision of financial services in Tanzania. For instance, while the World Bank (2018) reports a 9% gap between women and men in access to financial services worldwide, for Tanzania women exclusion stood at 39.3% percent, and that of men was 29.9% (FinScope, 2017). In addition, while 43.3% of the rural population was excluded from formal financial services, only 18.4 percent of urban were excluded (FinScope, 2017).
Financial Inclusion and Market Development in South Sudan
(AERC, 2025) Joseph, Samson Taban; Ajongo, Jacqueline Benjamin
Among the many problems facing the economy, financial exclusion is one of the major issues facing South Sudan in recent times. About 80% of the country’s adult population lack bank accounts, leaving them financially excluded from accessing and using financial products, services, and information. This is a concerning statistic, as financial inclusion is crucial for economic growth and societal development. This issue was engineered by the country’s high financial illiteracy rate (73%), who are mostly women, and people with special needs. Furthermore, limited financial infrastructure in various regions of the country, such as the insufficient number of bank branches in rural areas and strict Know Your Customer (KYC) regulations, remains a significant concern. Additionally, many adults lack the necessary documents to open bank accounts. As a result, the regulatory framework governing financial inclusion and the role of digital financial services in the country is inadequate.
The Monetary Economics of E-money and Implications for Monetary Policy in Uganda
(AERC, 2025) Okot, Nicholas; Shinyekwa, Isaac; Luwedde, Justine; Bulime, Enock W. N.
The policy brief summarizes findings from a study titled, “The Monetary Economics of E-money and Policy Implications: Evidence from Uganda.’’ The study examines the monetary economics of e-money and its policy implications for over the period 2009Q1-2022Q4. The research approach involves theoretical and empirical literature reviews. Quantitatively estimated and tested the stability of the money demand function using the Autoregressive Distributed Lag (ARDL) model and the monetary transmission through Vector Autoregressive (VAR) model. The qualitative aspect is based on the key informant interviews.
Financial Inclusion Primary in South Sudan
(AERC, 2025) Garang, James Alic
This policy brief addresses four key research problems: challenges in opening bank accounts and obtaining IDs, access to financial products and services, and financial literacy. One of the major barriers to accessing financial products, such as loans, is the requirement of a bank account, which in turn necessitates identification (ID). This issue is particularly critical in South Sudan, where only 37,000 people across the entire country possess IDs, highlighting a significant gap that must be bridged urgently. Due to the widespread financial illiteracy among much of the population, alternative mechanisms for issuing identity cards need to be introduced to include marginalized groups, such as women, people with disabilities, and those in rural areas.
Digital Financial Services through Mobile Phones: Bringing Inclusivity to Tanzania’s Rural Women
(AERC, 2025) Daniel, Lanta
Financial inclusion, particularly through mobile money services, plays a vital role in fostering economic growth in developing economies by providing access to financial products and services. In Tanzania, where 88% of the population owns mobile phones, approximately 45% possess mobile money accounts. Nevertheless, there remains a notable disparity concerning gender (men and women) and geographical location (rural and Urban), with women in rural areas being more prone to exclusion.

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