Financial Technology (FINTECH) and Financial Inclusion: Micro-Level Evidence from Ethiopia Using 2018/2019 Ethiopian Socio-economic Survey Data

Abstract

As the banking system evolves toward a cashless economy, digital transactions are rapidly increasing. In today’s financial landscape, cashless systems are no longer just a convenience but a necessity. As a result Financial Technology (FINTECH) is adopted to help companies, business owners and consumers better manage their financial operations. This paper investigates whether or not FINTECH contributes to financial inclusion at the household level in Ethiopia. The research analyzed 2018/19Ethiopian Socio Economic Survey (ESS) data using a multivariate Probit model. A new evidence is presented to show that FINTECH or mobile payments have a significant effect on Iddir which is an informal finance mechanisms. Additionally, it is disclosed that FINTECH significantly enhances formal savings and insurance uptake, though it shows no statistically significant effect on household account ownership or borrowing behavior. These findings suggest that policy makers should leverage the positive influence that FINTECH has on informal financial systems. That could be made possible by integrating digital payment solutions into platforms like Iddir. Expanding access to FINTECH services through promotion of savings and insurance among underserved populations can also advance financial inclusion. FINTECH does not appear to influence account ownership or household borrowing. Therefore, policy efforts should address structural barriers that are beyond access. Strengthening consumer protection measures could also further enhance inclusive access to financial services.