Determinants of Financial Inclusion in Kenya: A Demand-Side Perspective

John K. Njenga *

University of Nairobi, P.O Box 13187 - 00200 Nairobi, Kenya.

Esther N. Irungu

University of Nairobi, P.O Box 8894 - 00300, Nairobi, Kenya.

*Author to whom correspondence should be addressed.


Abstract

This study sought to analyze the underlying financial inclusion determinants in Kenya. The study applies ordinal logit regression to examine the effect of the residential area, gender, education level, marital status, and employment type on financial inclusion. Financial inclusion is measured by developing a financial inclusion index for ten binary financial services variables. From the index, three financial inclusion levels are designed. These include low financial inclusion with scores of zero to three, medium with scores of four to six, and high level with scores of seven to ten. The estimates of the ordinal model are statistically significant for all factors considered except gender. Area of residence, age, education type, income, and marital status positively affect the log odds of financial inclusion, while employment is negatively linked. Education, employment, and marital status have interaction effects on financial inclusion. This study recommends that the Kenyan government formulate and strengthen policies to tackle challenges such as gender disparity, rural bank infrastructure development, fostering an environment conducive for entrepreneurship to address unemployment and income disparities, advocating for secondary school completion, and addressing social issues impacting family stability, including separation or the absence of marriage.

Keywords: Financial inclusion, ordinal regression, determinants, Kenya


How to Cite

Njenga, J. K., & Irungu, E. N. (2024). Determinants of Financial Inclusion in Kenya: A Demand-Side Perspective. Asian Journal of Probability and Statistics, 26(5), 19–29. https://doi.org/10.9734/ajpas/2024/v26i5615

Downloads

Download data is not yet available.

References

Ozili PK. Theories of nancial inclusion. In Emerald Publishing Limited eBooks. 2020;89{115. Available:https://doi.org/10.1108/978-1-80043-095-220201008

Demirguc-Kunt A, Klapper L, Singer D, Ansar S. The global ndex database 2017: Measuring nancial inclusion and the ntech revolution. World Bank Publications; 2018.

Demirguc-Kunt A, Klapper LF. Financial inclusion in Africa: An overview. World Bank policy research working paper. 2012;6088.

Geraldes HSA, Gama APM, Augusto M. Reaching nancial inclusion: necessary and sucient conditions. Social Indicators Research. 2022;162(2):599-617.

Berhanu Lakew T, Azadi H. Financial inclusion in Ethiopia: Is it on the right track?. International journal of nancial studies. 2020;8(2):28.

Omar A, Inaba K. Does nancial inclusion reduce poverty and income inequality in developing countries? A panel data analysis. Journal of Economic Structures. 2020 9(1). Available: https://doi.org/10.1186/s40008- 020-00214-4

Kim, Dai-Won, Jung-Suk Yu, Mohammad Kabir Hassan.. Financial inclusion and economic growth in OIC countries. Research in International Business and Finance. 2018;43:1{14.

Giron A, Kazemikhasragh A, Cicchiello AF, Panetti E. Financial inclusion and development in the least developed countries in Asia and Africa. Journal of Innovation and Entrepreneurship. 2021;10(1). Available:https://doi.org/10.1186/s13731-021-00190-4

Nnaomah UI, Aderemi S, Olutimehin DO, Orieno OH, Ogundipe DO. Digital banking and nancial inclusion: a review of practices in the usa and nigeria. Finance & Accounting Research Journal. 2024;6(3):463{490. Available: https://doi.org/10.51594/farj.v6i3.971

Jubril TS, Jimoh AB, Kabiru SM, Surajudeen T. Financial inclusion in times of crisis: assessing the threat of covid-19 on access to banking services; 2024. Available: https://www.scholarexpress.net/index.php/wefb/article/view/4053

Ansong D. Okumu M, Huang J, Sun S, Huseynli A, Koomson I, Sherraden M. Financial capability and asset building: Innovations in social protection and development. In Handbook on Social Protection and Social Development in the Global South. Edward Elgar Publishing. 2023;308-330.

Danladi S, Prasad MSV, Modibbo UM, Ahmadi SA, Ghasemi P. Attaining sustainable development goals through nancial inclusion: Exploring collaborative approaches to ntech adoption in developing economies. Sustainability. 2023;15(17):13039. Available: https://doi.org/10.3390/su151713039

Bailey LE, Nyabola N. Digital equity as an enabling platform for equality and inclusion. Path nders for

Peaceful, Just, and Inclusive Societies/NYU Center on International Cooperation; June 2021. Available; https://cic.nyu.edu/resources/digital-equity-as-an-enabling-platform-for-equality-and-inclusion.

Wokabi VW, Fatoki OI. Determinants of nancial inclusion in East Africa. International journal of business & management. 2019;7(1):125-143.

Bashiru S, Bunyaminu A, Yakubu IN, Al-Faryan MAS. Drivers of nancial inclusion: insights from Sub- Saharan Africa. Economies. 2023;11(5):146.

Ozsuca E. Financial inclusion in Turkey: Evidence from individual level data. Ankara Universitesi SBF Dergisi. 2019;74(4). Available: https://doi.org/10.33630/ausbf.614032

Altarawneh Y, Al-Nuaimi M, Al-Nimri A. The determinants of nancial inclusion in Latin America and Europe (Brazil and Romania case). Systematic Reviews in Pharmacy. 2020;11(12):192-196.

Badar R, Anwar S, Naqvi SAA. Financial inclusion and determinants in South Asian countries. Journal of Accounting and Finance in Emerging Economies. 2020;6(2):623{633. Availavle:https://doi.org/10.26710/jafee.v6i2.1300

Yangdol R, Sarma M. Demand-side factors for nancial inclusion-A cross-country empirical analysis. Sage Journals. 2019;56(2{3). Available: https://doi.org/10.1177/0020881719849246.

Mhlanaga D, Denhere. Determinants of nancial inclusion in Southern Africa. Studia Universitatis Babe s- Bolyai . Oeconomica. 2020;65(3):39{52. Available: https://doi.org/10.2478/subboec-2020-0014

Rashdan A, Noura E. The determinants of nancial inclusion in Egypt. International Journal of Financial Research. 2020;11:1. Available:https://doi.org/10.5430/ijfr.v11n1p123

Gautier T, Luc N, Djimoudjiel D. Dynamic analysis of determinants of nancial inclusion in Cameroon. European Scienti c Journal. 2020;16(36):1. Available: http://dx.doi.org/10.19044/esj.2020.v16n1p106

Martin-Oliver A. Financial exclusion and branch closures in Spain after the Great Recession. Regional Studies. 2019;53(4):562-573. Available: http://dx.doi.org/10.19044/esj.2020.v16n1p106

Fanta A, Mutsonziwa K. Financial literacy as a driver of nancial inclusion in Kenya and Tanzania. Journal of Risk and Financial Management. 2021;14(11):561.

Agresti A. An introduction to categorical data analysis. New York: John Wiley & Sons, Inc; 1996.

Agresti A. Categorical data analysis, second edition. Hoboken, New Jersey: John Wiley & Sons, Inc; 2002.

Brant R. Assessing Proportionality in the Proportional Odds Model for Ordinal Logistic Regression. Biometrics. 1990;46(4):1171{1178. Available: https://doi.org/10.2307/2532457

Harrell FE. Regression modeling strategies. New York: Springer-Verlag; 2001.

Liao TF. Interpreting probability models: Logit, probit, and other generalized linear models. Thousand Oaks, CA: Sage Publications, Inc; 1994.

McCullagh P. Regression Models for Ordinal Data. Journal of the Royal Statistical Society. Series B (Methodological). 1980;42(2):109{142. Available: http://www.jstor.org/stable/2984952

Winship C, Mare RD. Regression Models with Ordinal Variables. American Sociological Review. 1984;49(4):512{525. Available: https://doi.org/10.2307/2095465