Digital Financial Inclusion and Individual Savings in East Africa: Evidence from Uganda, Kenya, and Tanzania

Digital Financial Inclusion and Individual Savings in East Africa: Evidence from Uganda, Kenya, and Tanzania | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Digital Financial Inclusion and Individual Savings in East Africa: Evidence from Uganda, Kenya, and Tanzania Kasumba Stephen Robert, Gertrude Ssebunya Muwanga This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-8118462/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract This study analyses the determinants of individual savings in Uganda, Kenya, and Tanzania using the Global Financial Inclusion (Global Findex) database 2021. The model integrates descriptive statistics, chi-square tests, t tests, ANOVA, and propensity score matching (PSM) to estimate causal effects while following the methodological guidelines of Rosenbaum and Rubin ( 1983 ). The study first documents strong associations between saving and a range of demographic, socioeconomic, and financial inclusion variables. Men, urban residents, higher-income and better-educated individuals, and those integrated into formal and digital financial systems (through account ownership, mobile phones, internet access, and digital payments) are significantly more likely to save and accumulate higher savings balances. The ANOVA results further reveal pronounced gradients in average savings across income quintiles, remittance channels, and modes of receiving wages, transfers, pensions, and agricultural payments, with account-based and digital channels consistently associated with greater savings. To address selection bias, PSM was employed to estimate causal effects. The results indicate that borrowing, remittances through formal or semiformal channels, and internet access significantly increase the probability of saving. Cross-country PSM estimates reveal that saving has a positive causal effect on income in Tanzania but not in Uganda or Kenya once financial inclusion and socioeconomic characteristics are controlled for. Regarding financial inclusion outcomes, saving has a clear causal link with borrowing in Uganda and a weak causal effect in Kenya but no robust causal impact on internet access, account ownership, or digital payment use in any of the countries after matching. In Kenya’s more mature digital ecosystem, digital payment usage itself has a strong causal effect on saving. Overall, the findings underscore the central role of digital and formal financial infrastructure, income, and labor market attachment in shaping savings, consistent with foundational theories such as the permanent income hypothesis (Friedman, 1957 ) and life cycle hypothesis (Modigliani & Brumberg, 1954 ). Policy priorities include expanding inclusive digital finance, promoting account-based payment channels, and designing country-specific strategies that leverage the complementarities between saving, borrowing, and digital financial inclusion. Development Economics Savings Financial inclusion Digital payments Propensity score matching Global Findex East Africa Uganda Kenya Tanzania Full Text Additional Declarations The authors declare no competing interests. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. 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Tanzania\u003c/strong\u003e\u003c/p\u003e","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":true,"hideJournal":true,"highlight":"","institution":"Makerere University","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"Savings, Financial inclusion, Digital payments, Propensity score matching, Global Findex, East Africa, Uganda, Kenya, Tanzania","lastPublishedDoi":"10.21203/rs.3.rs-8118462/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-8118462/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eThis study analyses the determinants of individual savings in Uganda, Kenya, and Tanzania using the Global Financial Inclusion (Global Findex) database 2021. The model integrates descriptive statistics, chi-square tests, t tests, ANOVA, and propensity score matching (PSM) to estimate causal effects while following the methodological guidelines of Rosenbaum and Rubin (\u003cspan citationid=\"CR4\" class=\"CitationRef\"\u003e1983\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eThe study first documents strong associations between saving and a range of demographic, socioeconomic, and financial inclusion variables. Men, urban residents, higher-income and better-educated individuals, and those integrated into formal and digital financial systems (through account ownership, mobile phones, internet access, and digital payments) are significantly more likely to save and accumulate higher savings balances. The ANOVA results further reveal pronounced gradients in average savings across income quintiles, remittance channels, and modes of receiving wages, transfers, pensions, and agricultural payments, with account-based and digital channels consistently associated with greater savings.\u003c/p\u003e\u003cp\u003eTo address selection bias, PSM was employed to estimate causal effects. The results indicate that borrowing, remittances through formal or semiformal channels, and internet access significantly increase the probability of saving. Cross-country PSM estimates reveal that saving has a positive causal effect on income in Tanzania but not in Uganda or Kenya once financial inclusion and socioeconomic characteristics are controlled for. Regarding financial inclusion outcomes, saving has a clear causal link with borrowing in Uganda and a weak causal effect in Kenya but no robust causal impact on internet access, account ownership, or digital payment use in any of the countries after matching. In Kenya\u0026rsquo;s more mature digital ecosystem, digital payment usage itself has a strong causal effect on saving.\u003c/p\u003e\u003cp\u003eOverall, the findings underscore the central role of digital and formal financial infrastructure, income, and labor market attachment in shaping savings, consistent with foundational theories such as the permanent income hypothesis (Friedman, \u003cspan citationid=\"CR2\" class=\"CitationRef\"\u003e1957\u003c/span\u003e) and life cycle hypothesis (Modigliani \u0026amp; Brumberg, \u003cspan citationid=\"CR3\" class=\"CitationRef\"\u003e1954\u003c/span\u003e). Policy priorities include expanding inclusive digital finance, promoting account-based payment channels, and designing country-specific strategies that leverage the complementarities between saving, borrowing, and digital financial inclusion.\u003c/p\u003e","manuscriptTitle":"Digital Financial Inclusion and Individual Savings in East Africa: Evidence from Uganda, Kenya, and Tanzania","msid":"","msnumber":"","nonDraftVersions":[{"code":1,"date":"2025-11-18 03:04:06","doi":"10.21203/rs.3.rs-8118462/v1","editorialEvents":[{"type":"communityComments","content":0}],"status":"published","journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true}}],"origin":"","ownerIdentity":"e05ad63f-4a64-4643-b4fb-3146f8d777a3","owner":[],"postedDate":"November 18th, 2025","published":true,"recentEditorialEvents":[],"rejectedJournal":[],"revision":"","amendment":"","status":"posted","subjectAreas":[{"id":58051770,"name":"Development Economics"}],"tags":[],"updatedAt":"2025-11-18T03:04:06+00:00","versionOfRecord":[],"versionCreatedAt":"2025-11-18 03:04:06","video":"","vorDoi":"","vorDoiUrl":"","workflowStages":[]},"version":"v1","identity":"rs-8118462","journalConfig":"researchsquare"},"__N_SSP":true},"page":"/article/[identity]/[[...version]]","query":{"redirect":"/article/rs-8118462","identity":"rs-8118462","version":["v1"]},"buildId":"8U1c8b4HqxoKbykW_rLl7","isFallback":false,"isExperimentalCompile":false,"dynamicIds":[84888],"gssp":true,"scriptLoader":[]}