Financial Technology, Financial Inclusion & Household Consumption in Ethiopia

Abstract

Using Ethiopian Scio-economic household survey data collected in 2018/2019 (ESS4), this study investigates the potential effect of FINTECH and financial inclusion on household consumption using Simultaneous Quantile Regression (QREG).The findings indicate that financial inclusion indicators (bank account holding, formal saving, and formal insurance) positively and significantly influence household consumption especially for low and middle income households while wealthier households will benefit from informal social group insurance (Iddir). Findings in heterogeneity analysis reveal that FINTECH has different levels of influence across regions and urban rural locations. Gender interaction reveals that women benefit more from FINTECH at higher income levels. Younger FINTECH customers, particularly those in higher consumption categories, benefit more, but elderly users may struggle to fully utilize FINTECH services. FINTECH and financial inclusion are also complemented by education. Rural households spend less than urban households as per expectations. They also benefit less from FINTECH than their urban counterparts.  Finally, the study suggests that both financial inclusion and FINTECH access should be promoted to enhance the household consumption and welfare in Ethiopia.