Digital Financial Services Project (DFSP) country Think Tank Report

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Bank Competition, Digital Finance, and Gender Differences in Financial Inclusion in East Africa
(African Economic Research Consortium, 2024-08-15) Wamalwa, Peter; Tiriongo, Samuel; Mulindi, Hillary
Competition in the banking sector is a catalyst for innovation and the adoption of digital channels to provide financial services. The low cost of providing financial services through digital channels has been leveraged on by banks to extend services to the underserved and the excluded. This paper deploys panel regressions and binary response models to analyse the impact of competition in the banking sector on penetration and utilization of digital financial services across gender in Kenya, Uganda, and Tanzania, controlling for competition in the telecommunications sector. The latest wave of Finscope Survey (2017) and financial inclusion household survey (FinAccess, 2021) datasets are used. The analysis shows that males have a higher probability of using digital financial services than females. Females in rural areas, engaged in the agriculture, services, trade and casual labour are less likely to use digital financial services compared to their male counterparts. Competition in the banking industry increases utilization of digital financial services due to banks leveraging on innovation to provide relevant services at low cost. Therefore, a policy approach that considers gender differences and fosters competition in banking and mobile telecommunication industries will encourage providers of financial services providers to effectively leverage on mobile money and digital finance to close gender gaps in the utilization of digital financial services in the EAC region.
Behavioural Biases in Financial Access and Usage Divide: The Kenyan Case
(African Economic Research Consortium, 2024-08-15) Osoro, Jared; Bundi, Davis; Kiplangat, Josea
The noticeable strides Kenya has made on digital financial services that anchor the positive narrative of financial inclusion is evidently leaning towards payment services. However, digital divide still exists due to behavioural heterogeneity. This paper explores the influence of behavioural biases in access and usage of mobile money services, the dominant digital financial services in Kenya. The 2021 FinAccess data anchors the empirical investigation on the extent to which behavioural biases are an obstacle to access and usage of mobile money. Deploying descriptive statistics on gender disaggregated data and a probit model to estimate marginal effects, we ascertain that behavioural biases contribute to the digital divide evident among men and women households in Kenya. These biases drive a wedge between access and enhanced usage of digital financial services in a manner that slows the sequential process of the former, leading to the latter. Beyond advancing literature in this area, this paper proffers arguments in favour of putting in place measures to enhance household incomes that have a gender lens, for they have the potential of ameliorating the gaps underlying financial exclusion of women and low-income earners in mobile money access and usage. It also argues for a policy position that discourages the consideration of basic digital financial services as a revenue mobilization platform through direct taxation as that could be counterintuitive.
Determinants of Mobile Money Adoption and Use in Burundi
(African Economic Research Consortium, 2024-08-15) Ndoricimpa, Arcade; Nyamweru, Jean Claude; Ndayikeza, Michel Armel
This study examines the factors determining mobile money adoption and use in Burundi. Heckman selection model is applied on a recent household dataset (Integrated household living conditions survey in Burundi, EICV 2019-2020). The estimation results point to different socio-economic factors that drive the adoption and use of mobile money in Burundi. Age category, education level, being a member of savings and loans associations, and household size are the factors determining the likelihood of mobile money adoption in Burundi, while the probability of mobile money use in Burundi seems to be influenced only by education level, place of residence, and the well-being level. Considering this study’s findings, the Government of Burundi should implement policies to reduce the gender gap and duality urban-rural. Efforts should also be put on education investment to reduce illiteracy. The Government of Burundi should also continue implementing policies to raise the well-being of the population and social self-sustained groups, and initiatives to increase incomes of the population especially in rural areas should be encouraged. In addition, concerted effort from different stakeholders, mobile network operators and regulators, is also needed. Making payment systems flexible by increasing mobile agents in remote areas would also most likely lead to increased mobile money adoption. We hope that the findings from this study will inform public authorities to take necessary measures to increase mobile money adoption and use in Burundi.
Development of the Digital Financial Ecosystem in Rwanda: Drivers, Lessons and Way Forward
(African Economic Research Consortium, 2024-08-15) Munyegera, Ggombe Kasim
Digital financial services (DFS) have the potential to promote payments’ efficiency and boost financial inclusion even in remote areas with minimal traditional financial infrastructure such as bank branches. In Rwanda, the digitization of payments is a key policy strategy in a bid to transform the country towards a more cashless and knowledge-based economy. Since the establishment of the Rwanda Integrated Payments Processing System (RIPPS), various policy and product innovations have been put in place to increase the share of transactions done electronically. This study examines the development path of digital financial services in Rwanda over the decade 2011-2021 using a mixed-methods approach. The quantitative part entails descriptive and regression analysis to ascertain the trend, patterns and determinants of uptake for key DFS products in the country while the qualitative key informant interviews with key stakeholders are used to ascertain the opportunities and challenges for further promoting DFS in the country. The findings indicate that between 2011 and 2021, the number of people using Internet and mobile banking increased quite substantially. The number of active mobile money subscribers increased from 1.6 million in 2012 to 5.1 million in 2021, while credit cards increased from 115,200 in 2011 to 686,309 in 2021. The transactional volume and value also increased remarkably, partly fueled by COVID-19 and innovative use of mobile money, including electronic tax payment. The study recommends improving Internet connectivity and quality, promoting digital literacy, improving interoperability and enhancing cyber security to further boost DFS in Rwanda.
Digital Financial Services through Mobile Phones: Status and Challenges Faced by Rural Women in Tanzania
(AERC, 2025) Daniel, Lanta; Mwighusa, Dennis; Diyamett, Bitrina
Financial services are key to economic growth and societal well-being, boosting access to credit, savings, and overall development. Despite progress in mobile phone and mobile money adoption in Sub- Saharan Africa particularly Tanzania, financial exclusion in the country remains high compared to other East African countries, with significant gender and urban-rural disparities. This study examines digital financial inclusion in Tanzania, focusing on rural women's experiences and challenges. Using focus group discussions and policy analysis, the study highlights major gaps in awareness, usage, and understanding of mobile money services, as well as overlooked policy aspects. Key findings reveal that while awareness of digital financial services is widespread, rural communities—especially women—lack a thorough understanding of these services. This gap in comprehension limits their usage, indicating that mere awareness is insufficient. The study underscores the importance of tailored interventions, such as community engagement, capacity building for agents, and targeted policy frameworks, to address these challenges. Recommendations are provided for both the public sector and the private sector on how to enhance financial inclusion, ensuring that no one is left behind in the digital financial landscape.
Digital Innovation Ecosystem Development for Financial Inclusion and Market Access: The Case of Tanzania
(African Economic Research Consortium, 2024-08-15) Mwighusa, Dennis; Diyamett, Bitrina
There is now consensus that innovative financial services that are provided in a more equitable and inclusive way are the cornerstone of social and economic development. In this regard, although Tanzania has recorded a significant growth in the level of financial service provision and has reached out to a good number of people in the country, especially through digital means, the country might not benefit from this wide coverage of financial services because it faces a glaring gap in inclusiveness. The reasons for the persistence of such exclusion – in spite of policies to address the challenges – are not clearly known. This work is an attempt to close this knowledge gap – basically towards understanding the factors contributing to both gender and location-related exclusion with the purpose to inform inclusion policies. The findings indicate that the major challenges revolve around inappropriate marketing strategies for the digital financial services for the poor; inappropriate products in terms of price and context fitness; and cost related to product development and service provision on the part of the providers. The existing inclusion policies did not seem to have helped much as they have some serious gaps in their design.
Disability, Digital Financial Services and Financial Inclusion: Evidence from Rwanda
(African Economic Research Consortium, 2024-08-15) Munyegera, Ggombe Kasim
Persons with disabilities have disproportionately lower levels of access to financial and other services globally, resulting in lower socio-economic status relative to the general population. This study uses a mixed methods approach to quantify and explain the disability divide in Rwanda’s financial services. Using Probit models, the probabilities of accessing, owning and using digital platforms, financial accounts and products, and financial services are estimated while Tobit models are used to estimate the value of financial transactions. Probit and Tobit estimates are complemented by propensity score matching (PSM) as a robustness check. The results indicate that persons with disabilities are significantly less likely to own a mobile phone, computer and Internet or even use those owned by someone else. Ownership rates of mobile money and bank accounts, automated teller machine (ATM), credit cards, and usage of mobile and Internet banking are also lower among persons with disabilities. The usage of financial services – saving, remittances, credit and insurance – is also lower among persons with disabilities at the extensive margin (probability of usage) and intensive margin (value of transactions). A further finding is that, conditional on having a disability, females are less financially included related to males. The findings carry key implications regarding the need to boost financial inclusion for persons with disabilities to achieve overall equality as stipulated in Sustainable Development Goal (SDG) 10. Among others, there is need for interventions to raise digital and financial literacy among persons with disabilities and develop innovative products that appeal to the financial needs and difficulties of this vulnerable group in general and women with disabilities in particular.
Impediments to the Evolution of Mobile Money and Financial Inclusion in South Sudan
(African Economic Research Consortium, 2025-02-07) Garang, James Alic
This paper examines the constraints both to the evolution of mobile money and the broader banking sector provision of financial services in South Sudan, focusing on the conflict and state of financial inclusion during the 2011-2021 period. While mobile money has gained momentum in the region and beyond, its introduction in the South Sudanese market is recent, and adoption has been much slower, and differentiated, with customers more likely to have a mobile money account if they are better educated, live in the city, are male, and wealthy. A key contributor is the rudimentary level of South Sudan’s financial sector development, which feeds into financial exclusion, and the impact of preceding conflicts. Broadly, the paper confirms the longstanding view that economic disruption associated with the civil war and lack of supportive infrastructure are central barriers to expansion of financial services across the country. In conclusion, sustained stability and improved general infrastructure could enhance expansion of financial services and broader inclusion in South Sudan.
Leveraging Digital Services and Market Development for Financial Inclusion
(African Economic Research Consortium, 2024-08-15) Shinyekwa,Isaac, M.B.; Mpuuga, Dablin; Nattabi, Aida K.; Bulime, Enock W.N.
The paper examines the extent to which digital financial services – mobile money, online banking and agency banking – contribute to financial inclusion in Uganda. We identify the key enablers and inhibitors of access and usage of digital financial services. To achieve this, we adopt a mixed methods approach and use the recent 2019/20 Uganda National Household Survey (UNHS) data, the World Bank’s Global Findex data for 2021, and insights from key informant interviews. We use an instrumental variable approach to control for endogeneity and run recursive probit models for the binary outcomes of usage of mobile money services, agency banking, and commercial banks. We also run models for access to commercial banks and usage of informal groups. The results re-affirm the gap between men and women in access to and usage of digital and formal financial services, although this gap has significantly reduced over time. We also find that informal financial groups are used more by women. Financial literacy proxied by an individual’s ability to read and/or write is a significant enabler of digital financial services usage among both men and women. Conversely, saving money at home/secret place has a strong negative effect on the overall usage of digital financial services, but a strong positive effect on the usage of informal groups. The new financial inclusion strategy should provide incentives to the private sector to promote innovation and investment in a broad range of new, friendly, and affordable products to attract the excluded sections of the population. Importantly, cultural and community institutions provide better opportunity towards changing social norms that have for long disadvantaged women and kept them financially excluded
Mobile Money Usage: A Comparative Analysis of Burundi with other East African Countries
(African Economic Research Consortium, 2024-08-15) Ndayikeza, Michel Armel; Nyamweru, Jean Claude; Ndoricimpa, Arcade
This study examines the use of mobile money services in Burundi and compares it with other East African countries to identify areas for improvement. The focus is on the supply side, with the aim of offering practical recommendations for policy makers to enhance the usage of mobile money. We use secondary data to compare mobile money usage and transaction fees across East African Community (EAC) countries. Additionally, the analysis draws on semi-structured interviews with key informants from the National Agency of Regulation and Control of Telecommunications, the Central Bank of Burundi, the Ministry of Finance, and other institutions crucial to the development of mobile money. The information collected during these interviews is organized into four thematic areas: institutional environment and regulation, interoperability, government's role, and the impact on smallholder farmers. The findings indicate that mobile money usage in Burundi is relatively low, standing at 11%, in comparison to other EAC countries. Although higher than South Sudan's usage rate of 1%, it falls far behind Tanzania (45%), Uganda (54%), and Kenya (69%). The cost of sending US$ 10 varies between 0.2% and 10.8% across EAC countries, with the lowest fees observed in Kenya and the highest in Tanzania. Interviews with experts highlighted the need for supply-side actors to recognize the country's low mobile money usage rate and fully realize the potential benefits of this technology. The study contributes to the limited literature on mobile money and digital finance in Burundi and offers some policy recommendations to address the issue.
The Monetary Economics of e-Money and Policy Implications: Evidence from Uganda
(AERC, 2025) Okot, Nicholas; Shinyekwa, Isaac M. B.; Bulime, Enock N. W.; Luwedde, Justine
The fourth-generation technological innovations coupled with Fintech has evolved into global transition to e-money. In Uganda the uptake and usage of e-money services have exponentially grown since the introduction of mobile money services in 2009. This study examines the theoretical foundation of e-money economics and employs time-series econometric approaches on Uganda data for the period 2009Q1-2022Q4 to assess their implication on the stability of the money demand function and transmission of monetary policy. The test for stability following the estimation of the money demand function with autoregressive distributed lag (ARDL) and transmission mechanisms in the vector autoregressive (VAR) model indicate that, e-money distorts the stability of the money demand function in the short-run and is procyclical with monetary policy shock (policy interest rates adjustments). These attributes of e-money are likely to adversely affect the effectiveness of monetary policy transmissions.

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