Financial Technology and Financial Inclusion: Evidence from East African Community Member Countries

Abstract

This study examined the effect of financial technology on financial inclusion in the eight East African Community member countries. Financial technology was operationalised through penetration rate, usage rate and transaction volume. Anchored on the Diffusion of Innovations Theory, the study adopted a positivist philosophy and an explanatory longitudinal panel design. A balanced panel of 80 country-year observations covering 2014–2023 was analysed by random-effects generalised least squares. The model was significant (Wald χ² = 88.53, p < 0.001) and explained 66.67% of the variation in financial inclusion. Penetration rate (β = 5.107, p = 0.001) and transaction volume (β = 5.198, p < 0.001) had positive significant effects, whereas usage rate was insignificant (β = 4.769, p = 0.398). The reach of digital-financial infrastructure and the intensity of transactions matter more for inclusion than usage frequency. The study recommends affordable digital infrastructure, interoperable payment ecosystems and consumer protection.

Keywords:       Financial technology, financial inclusion, penetration rate, usage rate, transaction volume, East African Community.