The Effect of Digital Finance on Financial Inclusion in Selected Financial Institutions: In the Case Addis Ababa

Abstract Ethiopia is listed almost the last in financial inclusion in which many financially excluded individuals reside in that resulted financial discrimination, financial illiteracy and ultimately in financial exploitation with lack of access to health, education, and welfare services. Therefore, this study aimed at examining the effect of digital finance on financial inclusion in selected financial institutions in Addis Ababa. The study employed a descriptive and explanatory research design. The target population was digital finance service providers. The Panel Data obtained from bank, and primary data by survey questioner distributed to purposively selected managers and interview were used, and analyzed using descriptive and inferential analysis. The result shows Mobile banking, Agency banking, and Digital Payment has statistically significant positive effect on financial inclusion in Ethiopia. However, Internet banking has a positive but insignificant relationship with financial inclusion. The result also shows that DFS have several benefits to the economy to boost financial inclusion. From the study findings, the gap in the existing enabling digital ecosystem and infrastructure is an obstacle for the low adoption of DFS in the country. Therefore, the study shows need to enhance the level of adoption of DFS and deepen financial inclusion by tapping the untapped potential of the DFS. It is required to give attention to the linkage, integrity, and interoperability between MFIs, RUSAACOS, and banks. Besides, having a program to finance for the poor by powering digital microfinance with agents at the last miles of the poor with digital identity increase access to finance. Based on the findings from the study the gov’t has to create enabling environment, convenient to commence new digital finance tool backed with enabling policy, directives and efficient, accessible, usable and quality financial infrastructure in favor of promoting financial inclusion.