Comparative assessment of determinants of financial access and inclusion in Nigeria and Rwanda

Abstract

This study comparatively assesses the determinants of financial access and inclusion as well as the impact of these factors on the probability of financial access and inclusion in Nigeria and Rwanda. Financial access and inclusion is believed to be a potent tool for poverty and income inequality reduction. Despite the theoretical background stating that financial inclusion can bring tremendous welfare gains to the very poor, empirical evidence is rather scanty. Using the probit regressions and desk study analysis, the results show that high education, high income level, age, informal borrowing and relatives account ownership significantly influence financial access and inclusion in both Nigeria and Rwanda. Country-wise, financial inclusion reduces poverty and income inequality in Rwanda more than in Nigeria. Also, the probability of financial access and inclusion is higher among those who at least completed secondary school in Nigeria relative to Rwanda. However, the results suggest that males are more likely to be financially included than their female counterparts especially in Rwanda due to wider income inequality. In terms of informal borrowing, Nigerians are more likely to borrow from money lenders whereas Rwandans are more likely to borrow from friends/relatives. Finally, the results show that the net wealth benefit derived from financial access and inclusion significantly reduces poverty in both Nigeria and Rwanda. We therefore recommend that the governments should mainstream financial innovation to the poorest people as a key strategy to achieve its 70% and 80% financial inclusion rate by 2020 and 2018 respectively.