The analysis of financial inclusion and its determinants in the rural area of south Wollo zone, Amhara Region, Ethiopia

Abstract

The main goal of this study is to examine financial inclusion and related factors in rural South Wollo Zone areas. The binary logit model, primary and secondary data, and multi-stage sampling techniques were all applied in the study. Only 20.72 percent of those questioned in the rural South Wollo zone were given access to formal financial institutions, leaving 79.28 percent of those who were excluded. According to the report, access to traditional financial institutions is influenced favorably by factors such as affordability, financial literacy, age, and secondary education in rural areas, as well as the availability of Islamic banking services. Both the inability of rural inhabitants to access formal financial institutions and their lack of trust in traditional financial institutions represent significant obstacles. The study also looks into the expensive replacement of formal financial institutions in rural areas by traditional financial groups. Based on our research, we recommend that the government and other relevant organizations seek to improve the country’s degree of financial inclusion in rural areas by offering formal financial services at a reasonable cost and by boosting the financial capacity of rural low-income groups.

Keywords:

• financial inclusion
• binary logistic model
• development and rural area

PUBLIC INTEREST STATEMENT

For emerging nations to lower their levels of poverty and to promote inclusive economic growth, financial inclusion is crucial. As a result, the primary factors influencing financial inclusion in Ethiopia’s rural South Wollo zone are the focus of this study. The study indicated that key factors of financial inclusion in rural areas included age, cost, financial competence, education, and Islamic banking services.

Acknowledgements

We appreciate the editor’s feedback as well as that of the reviewers who chose to remain anonymous. We also acknowledge Wollo University’s financial contribution to this work.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Availability of data

The data sets used for the current work will be made available by the relevant author upon reasonable request.

Notes

1. Kebele, is the lowest administrative system in Ethiopian authority hierarchy.

2. Households in the target kebeles.

3. Marginal effect of the binary logistic estimates’ and dy/dx for factor levels is the discrete change from the base level.

Additional information

Funding

The authors received no direct funding for this research.

Notes on contributors

Tefera Getachew Dagnachew

Tefera Getachew Dagnachew is a lecturer at wollo university, Ethiopia. His research interest includes development issues like poverty, food security, household economics, rural development, macroeconomics policy analysis, urban and regional economics and agricultural policy analysis.

Temeselew Woldetsadik Mawugatie

\Temeselew Woldetsadik Mawugatie is a lecturer at Wollo University, Ethiopia. His research interest includes Development issues like poverty, food security, household economics, rural development, agricultural innovations and extensions, education economics, Urban and regional economics, agricultural policy analysis, and Microeconomics policy analysis.