The Relationship Between Financial Inclusion and Gdp Growth in Kenya

Abstract

Financial inclusion is a necessary condition for financial deepening, which helps to address the basic issue of growth with equity. Financial inclusion is a step toward inclusive development. The financial system in Kenya still remains under-developed as compared to other developing economies. With the invention of mobile money, Kenya has experienced positive growth in the financial sector in the recent decade. The objective of this study was to determine the relationship between financial inclusion and economic growth in Kenya. The study adopted a descriptive research design which is concerned with the what, where and how of a phenomenon hence more placed to build a profile on that phenomenon. The study used secondary data collected from various sources including Kenya National Bureau of Statistics while data and the Central Bank of Kenya. The study period was 2002/2003-2011/2012 financial periods. The study used annual data because economic growth was determined annually. In order to determine the relationship between financial inclusion and economic growth in Kenya, the researcher conducted a multiple regression analysis. This study concludes that economic growth in Kenya has a strong positive relationship with financial inclusion in Kenya. Economic growth has a strong positive relationship with branch networks and a weak positive relationship with the number of mobile money users/accounts. On the other hand economic growth has a weak negative relationship with the number of automated teller machines in the country and a strong negative relationship with the bank lending interest rates. A branch network has the highest influence on the economic growth followed by number of mobile money users/accounts then the number of automated teller machines in the country and bank lending interest rates. There is continuous economic growth in Kenya and that the economic growth and that the number of automated teller machines, number of mobile money users as well branch networks is on increase. This study recommends that the policy makers should come up with legislation that will prevent such occurrences in the future.