The Effect of Financial Technology on Financial Inclusion by the Financial Institutions in Lesotho

Abstract

More than 50 percent of the population in developing countries does not have any form of financial account. Lesotho is not an exemption because about 38 percent of adults have no bank account. This suggests that a significant percentage of the adult population lacks access to financial services in the country. Considering the role of financial inclusion in social-political and economic development, many studies have been conducted in developed nations to establish how it is impacted by financial technology. The few studies done on Lesotho primarily focus on one measure of financial technology, mobile money. This study intends to fill the gap by assessing the effect of other measures; mobile money transfer, online and ATM banking, bank infrastructure on financial technology in Lesotho. The study employed 9-year secondary quarterly series sourced from the World Development Indicators and the Central Bank of Lesotho. Both descriptive and inference analyses were used for analysis purposes. The correlation analysis indicates that mobile money transfer, online banking, ATM banking, banking infrastructure, and interest rates are positively associated with financial inclusion. In contrast, economic growth has a negative relationship with financial inclusion. Findings from the regression analysis show that all measures of financial technology positively impacted financial inclusion except mobile money transfer. Also, the estimated model has an R-Squared of 0.92, which implies that whenever there is variation in financial inclusion, the independent variables are responsible for 92 percent of the changes. The study recommends increasing bank branches, especially in remote areas, enhancing deposits accounts which lead to growth in deposit and withdrawal transactions.