The Assessment of Digital Banking on Financial Inclusion in Ethiopia: A Case Study of Selected Commercial Banks (European Journal of Economics)

Summary

• In 2022, financial inclusion reached 46% in Ethiopia, with the government targeting 70% account ownership by 2025.p.1
• Globally, 1.4 billion adults remain unbanked, and low-income countries exhibit account ownership levels below 30%.p.1
• The panel regression model applied in the study explains 88.9% of the total variation in financial inclusion across sampled private commercial banks.p.1
• Sampled private banks recorded a mean total asset value of 5.73e+10 (57.3 billion) and mean loan availability of 3.82e+10 (38.2 billion).p.15
• Fixed effect regression results show that a 1-unit increase in internet banking users increases financial inclusion by 0.68 units.p.18
• A 1-unit increase in ATM card users leads to a 0.762-unit increase in financial inclusion.p.18

Key insights

1. Internet banking usage has a statistically significant positive effect on financial inclusion in Ethiopia's private banking sector.p.18
2. ATM card adoption significantly drives financial inclusion, yielding a 0.762-unit increase in active accounts per unit increase in users.p.18
3. Mobile banking usage does not exhibit a statistically significant positive effect on financial inclusion in the econometric model.p.19
4. Total bank assets do not demonstrate a statistically significant impact on expanding financial inclusion.p.19
5. Loan availability shows a statistically significant positive relationship with financial inclusion, featuring a coefficient of 0.000044.p.18
6. The combined fixed effects econometric regression model explains 88.9% of the variation in financial inclusion metrics.p.19