Digital Finance Policy and its Impact on Financial Inclusion in Uganda

Sound policies provide a formal framework for interaction between economic agents engaged in the production, distribution, exchange and consumption of goods and services. The transition to digital finance requires policies that spur innovation and promote competition while protecting agents to enhance confidence in the financial system and financial inclusion. Uganda has enacted a set of laws, regulations, policies and guidelines to regulate digital financial services (DFS). This study examined the impact of digital finance policies on financial inclusion coupled with the gender and rural/urban dimension using the treatments effects model and key informant interviews (KIIs). The findings showed that digital finance policies enhance financial inclusion for both men and women, largely driven by the uptake of mobile money services. Individuals with financial awareness use DFS such as online banking, mobile wallets and agent banking, but are cognizant of risk of fraud. Further, rural dwellers were less likely to access digital finance than were their urban counterparts. The KII confirmed that indeed DFS has enhanced access and usage of financial services. The other drivers of financial inclusion cited were costs, convenience and FinTech innovations. However, gender disparity existed, with rural women being the most disadvantaged. This requires public policy to provide infrastructure where the private sector has no incentives, review distortionary taxes, enhance financial literacy and mitigation of cybercrime.