The effect of mobile money on expanding access to formal financial services in Uganda: a case of Kampala City

Abstract

Mobile money – a financial product that allows users to access financial services over the mobile phone – has been gradually changing the financial access situation for many people formerly excluded from the formal financial sector especially in Sub–Saharan Africa, Uganda inclusive. The study evaluated the effect of mobile money on expanding access to formal financial services in Uganda: a case of Bwaise Parish in Kampala city. It was guided by these specific objectives: to identify the social categories that use mobile money accounts as compared to those who only use official bank accounts and to those who would use both types of accounts at the same time; to determine the influence of financial intermediary penetration on the utilization of mobile money accounts versus traditional bank accounts, and the concurrent utilization of both account types, in the context of enhancing financial inclusion through mobile money. The study was a cross – sectional and descriptive study which utilised primary data by administering a well – structured questionnaire to 345 respondents who reside in Bwaise Parish. The study used a multinomial probability model to determine the choice of use of accounts (mobile money accounts, formal bank accounts and mobile money accounts in the context of the ownership of both types of accounts). Based on the summary of the study results, the study concludes that demographic and socio– economic factors such as gender, age, education, marital status, employment status, and income may not be significant predictors of choosing a "mobile money account only" over having both types of accounts. Additionally, the perceived convenience of financial services and the ease of access to specific services may not play a significant role in predicting the choice between different financial service options. However, user–friendly experiences with formal banking services appear to positively influence the preference for a "bank account only" outcome. Therefore, there is need to for financial institutions to further enhance user friendly services to attract more individuals especially those in the formal sector. There is also need to investigate certain aspects of education such as digital skills and financial literacy to meet the user friendliness even among the urban poor. So encourage increase in education levels through an introduction of incentives in education systems to promote the attainment of the highest levels of education by the largest number of people in the urban poor. Also, these findings provide essential insights for researchers and policy formulators to explore other employment related variables such as job stability and industry type as opposed to just employment status.