Bank Competition, Digital Finance, and Gender Differences in Financial Inclusion in East Africa

Competition in the banking sector is a catalyst for innovation and the adoption of digital channels to provide financial services. The low cost of providing financial services through digital channels has been leveraged on by banks to extend services to the underserved and the excluded. This paper deploys panel regressions and binary response models to analyse the impact of competition in the banking sector on penetration and utilization of digital financial services across gender in Kenya, Uganda, and Tanzania, controlling for competition in the telecommunications sector. The latest wave of Finscope Survey (2017) and financial inclusion household survey (FinAccess, 2021) datasets are used. The analysis shows that males have a higher probability of using digital financial services than females. Females in rural areas, engaged in the agriculture, services, trade and casual labour are less likely to use digital financial services compared to their male counterparts. Competition in the banking industry increases utilization of digital financial services due to banks leveraging on innovation to provide relevant services at low cost. Therefore, a policy approach that considers gender differences and fosters competition in banking and mobile telecommunication industries will encourage providers of financial services providers to effectively leverage on mobile money and digital finance to close gender gaps in the utilization of digital financial services in the EAC region.