Barriers to formal financial inclusion and household financial wellbeing in Uganda, evidence from the finscope Uganda 2023 Survey

Abstract

This study examined the association between selected barriers to formal financial inclusion and household financial wellbeing in Uganda using the FinScope Uganda 2023 Survey (N = 3,176). The main objective was to assess whether mobile money transaction costs, physical access, digital loan awareness, and network reliability are significantly associated with household financial wellbeing, and to evaluate the role of access to and awareness of the Parish Development Model (PDM). Household financial wellbeing was operationalized using a resilience proxy: how long a household could cover its living expenses if its main source of income is lost. Data were analyzed using descriptive statistics, the Pearson Chi-Square test, and Ordinal Logistic Regression, with diagnostic tests for parallel lines, multicollinearity, and model specification. Descriptively, the sample was predominantly rural (69.4%), female (55.2%), and young, with the largest proportions in the 16–26 and 27–37 age brackets. Most respondents reported network failures (73.9%) and lacked awareness of digital loans (71.3%), while fewer reported being overcharged (17.4%) or living far from formal service points (10.4%). Resilience was low, with 46.7% unable to cover expenses beyond one month if their main income source were lost and only 9.5% able to sustain beyond six months. The bivariate analysis found that age (p < 0.001), income (p < 0.001), employment status (p < 0.001), gender (p < 0.001), access to PDM (p = 0.004), and network reliability (p = 0.032) were significantly associated with resilience, while the other selected barriers and location were not; however, all selected barriers and PDM variables were retained in the multivariate model in line with the conceptual framework. The Ordinal Logistic Regression model was statistically significant (LR χ²(16) = 204.09, p < 0.0001, Pseudo R² = 0.0209), with age (ORs increasing from 1.420, 95% CI [1.201, 1.678] for 27–37 to 2.523, 95% CI [2.016, 3.157] for 60+, relative to 16–26) and income (OR = 1.603, 95% CI [1.407, 1.825] for UGX 150,000–5,000,000 relative to less than UGX 150,000) positively associated with higher resilience, and access to PDM (OR = 0.824, 95% CI [0.723, 0.940]), female gender (OR = 0.797, 95% CI [0.701, 0.906]), and unemployment (OR = 0.681, 95% CI [0.589, 0.788]) negatively associated with it, while location and all four selected barriers were non-significant. The study found out that the four selected barriers examined were not significantly associated with resilience; instead, demographic and socioeconomic factors particularly age, income, gender, and employment status showed the most consistent and statistically significant associations, as well as access to PDM. The study recommends shifting financial inclusion policy toward structural determinants such as gender inequality, unemployment, and income insecurity; reviewing PDM targeting, disbursement, and monitoring; and using panel data in future studies to examine unobserved factors such as household size, asset ownership, and social networks.