Browsing by Author "Angiro Felicity"

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    Assessing the Impact of Inflation Rate Targeting On Financial Inclusion in Uganda.
    (Makerere University Business School, 2023-12-07) Angiro Felicity
    The purpose of this study was to assess the impact of inflation targeting on financial inclusion in Uganda. The study was driven by the fact that a large section of the population in rural and urban areas in Uganda still remains outside the coverage of formal financial systems and does not have access to basic financial services like savings accounts, credit, remittances, and insurance. Three (3) objectives informed this study: (i) to examine the effect of inflation targeting on the level of financial inclusion in Uganda, (ii) to examine the effect of interest rates on the level of financial inclusion, and (iii) to examine the influence of mobile money services on financial inclusion in Uganda. The study employed both qualitative and quantitative research designs. For quantitative assessment, data were collected from the Bank of Uganda, the World Bank, and the Uganda Bureau of Statistics, and annual time series data from 1994 to 2021 for each of the variables. An ARDL estimation was used to assess the effects of the specified variables. For qualitative analysis, the targeted study population for this study was the Central bank, Commercial, and businesses that use the banking products, such as Saccos, within Kampala. The purposive sampling technique was used to select senior staff and managers as samples since they conform to certain characteristics that are relevant to this study, and the data were collected using an interview guide. Findings reveal that a 1% increase in inflation is associated with a 0.4% increase in commercial bank branches and 28% decrease in the number of depositors, respectively. Further, a 1% increase in real interest rate, a 0.2% and 0.7% decrease in commercial bank branches and number of depositors, respectively. In general, results prove that an efficient monetary policy improves financial inclusion. However, this study demonstrates that financial inclusion is not relevant to the effectiveness of the monetary policy. Thus, the effectiveness of the monetary policy depends on the level of financial inclusion. Overall, the negative influence of real interest rate on financial inclusion is consistent with the expectation that high interest rates discourage borrowers because it is relatively expensive to access financial services in terms of accessing credit and also saving. Rather than participate in the formal and mainstream financial sector, individuals are likely to seek alternative options, including informal sources for financial services such as Saccos. Therefore, BOU should put emphasis on inflation targeting as a monetary policy tool because inflation affects individuals and businesses directly, hence affecting financial inclusion.