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Impact of Financial Inclusion on Consumption Expenditure in Kenya

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  • Isaac Mwangi
  • Rosemary Atieno

Abstract

The main agenda of this study is to explore the impact of both single (transactionary, credit, savings and investment, insurance and pension) and composite (portfolio usage) measures of financial inclusion on household welfare in Kenya. To address this, the study makes use of repeated household Financial Access datasets over 2009-2016 to apply dynamic panel regression methods. The results show that the observed differences in welfare varies by financial product with the credit channel taking the lions share. A zero to one change from non-usage (control) to usage (treatment) of credit, transactionary and insurance products among Kenyan households was found to be statistically significant in raising household welfare ceteris paribus. Similarly, the coefficient of the constructed index of financial inclusion was found to be both positive and statistically significant in explaining household welfare. Given the significant role financial inclusion plays in enhancing welfare, the study recommends a reduction in transactionary costs through an increase in the range of formal financial products to raise competition in financial markets. Policies targeting welfare improvement through finance should also be aligned to specific financial inclusion transmission channels to be more effective as opposed to policy formulation based on economic aggregates.

Suggested Citation

  • Isaac Mwangi & Rosemary Atieno, 2018. "Impact of Financial Inclusion on Consumption Expenditure in Kenya," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(5), pages 114-128, May.
    • Handle: RePEc:ibn:ijefaa:v:10:y:2018:i:5:p:114-128
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    Cited by:

    1. Iheonu O Chimere & Tochukwu Nwachukwu, 2020. "Macroeconomic determinants of household consumption in selected West African countries," Economics Bulletin, AccessEcon, vol. 40(2), pages 1596-1606.

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    More about this item

    Keywords

    welfare; endogeneity; financial inclusion; consumption;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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