Financial Technology and Financial Inclusion: Evidence from East African Community Member Countries (OpenAlex (recherche mondiale))

Summary

• The study investigates the impact of financial technology on financial inclusion across 8 East African Community countries over the period 2014–2023 using a panel of 80 country-year observations.p.1
• Penetration rate exhibits a positive and statistically significant coefficient of β = 4.965 (p = 0.002) in the baseline random-effects model with controls.p.1
• Transaction intensity yields a positive and significant effect of β = 4.552 (p = 0.001), indicating that transactional depth drives financial inclusion.p.1
• The composite Financial Inclusion Index recorded an overall mean of 41.03, spanning from a minimum of 5.60 to a maximum of 83.70.p.7

Key insights

1. Fintech penetration rate and transaction intensity demonstrate statistically significant long-run positive associations with financial inclusion across East African countries.p.1
2. Usage frequency shows no statistically significant independent effect on financial inclusion once account penetration rate and transaction intensity are included in the model.p.1
3. The Hausman test yields a statistic of χ²(5) = 4.79 (p = 0.441) when control variables are included, supporting the random-effects estimator over fixed effects.p.1
4. A 10% increase in real GDP per capita increases the financial inclusion index by 1.8 to 3.0 points depending on the model specification.p.11
5. Year-to-year changes in fintech indicators do not predict short-run changes in financial inclusion, as demonstrated by an insignificant first-difference model (F = 0.66, p = 0.654).p.12
6. Frequent digital activity in East Africa remains concentrated in basic P2P transfers and cash transactions rather than formal credit, savings, or insurance services.p.13
7. Regulatory frameworks in major East African markets separate payment service providers from deposit-taking institutions, requiring formal bank partnerships to deliver digital loans or savings.p.13