Relative effect of digital financial inclusion on financial resilience across Kenya, Tanzania and Uganda: exploring linkages and potential pathways

Purpose This study aims to examine the relationship between digital financial inclusion and financial resilience in three East African countries Kenya, Tanzania and Uganda with the aim of understanding how access to digital financial services shapes the ability of households and individuals to withstand and recover from financial shocks. Design/methodology/approach The study draws on InterMedia’s 2017 financial inclusion data for Kenya, Tanzania and Uganda, with the 2017 Global Financial Inclusion (Global Findex) database used to test the consistency of findings. To address the problem of endogeneity, the study uses two-stage least squares (2SLS) estimation. The robustness of results is further verified using propensity score matching, Lewbel 2SLS technique and Instrumental Variable Probit. Findings The results consistently show that digital financial inclusion has a significant positive effect on financial resilience across all three countries. The effect is found to be strongest in Uganda, followed by Tanzania and Kenya. Digital financial inclusion is also shown to be particularly beneficial for rural residents and women. Furthermore, the study identifies increased savings behavior and a greater propensity for entrepreneurship as the key pathways through which digital financial inclusion enhances financial resilience. Originality/value This study contributes to the growing literature on digital finance and household economic resilience in sub-Saharan Africa by providing rigorous cross-country empirical evidence from East Africa using multiple estimation strategies to ensure robustness. The findings generate actionable policy recommendations, including the expansion of digital financial infrastructure, the strengthening of financial literacy programs and the design and implementation of gender-inclusive financial policies that specifically target women and rural communities.