The impact of financial inclusion on economic growth in Uganda from 1986 to 2022

This study evaluates the impact of financial inclusion on economic growth in Uganda, using 37 years of annual data (1986–2022) obtained from the World Development Indicators database. We estimate financial inclusion (in terms of domestic credit to the private sector) as a percentage of Gross Domestic Product using an autoregressive distributed lag model. The approach estimates short-term and long-run effects, while controlling for inflation, government consumption expenditure, gross capital formation, and trade openness. The results show that an increase in financial inclusion tends to increase economic growth in the short run but decreases it in the long run, while an increase in government expenditure leads to increased economic growth in the short run with fewer negative long-term effects, holding other factors constant. The error correction parameter is 86.7%, indicating a quick return to equilibrium after short-run deviations. Therefore, national development policies should prioritize the provision of long-term credit to industries, sustain public consumption expenditure, and enhance financial literacy to support economic growth. Such policies can enhance achievement of the Sustainable Development Goals (SDGs) of Zero Poverty (SDG 1), Inclusive Growth (SDG 8), and Equality (SDG 10) in Uganda, with potential application to similar contexts elsewhere in sub-Saharan Africa and beyond.