Digital Financial Services, Financial Literacy, and Financial Inclusion among Youth from Selected Universities in Nairobi City County, Kenya.

Abstract

More than twenty-five percent of the total population in Kenya comprises persons aged between 18 and 35 years. Kenya vision 2030 advocates for youth empowerment through the provision of adequate and appropriate technical skills. Further, the government of Kenya through treasury established Uwezo and Youth Enterprise Development Funds as the source of affordable credit facilities available to youth to enhance entrepreneurship. Despite these measures by the government, youth in Kenya continue to face financial exclusion. In 2019, more than 48.9 percent of youth, which comprised of 23.5 percent males and 25.4 percent of females were excluded from accessing financial services. The main objective of this study was to investigate the effect of digital financial services and financial literacy on financial inclusion among youth from selected universities in Nairobi City county. Specific objectives were to establish the effects of digital payments, digital savings, and digital credit on financial inclusion among youth from selected universities in Nairobi City county. The technology acceptance model, rational choice theory, and financial literacy theory were used to anchor this study. The study adopted a positivism research philosophy and explanatory research design. The target population was youth drawn from selected universities in Nairobi city county in the year 2020 estimated at 84,848. The study adopted stratified and simple random sampling techniques to generate a sample size of 385 youth. The study collected primary data using a structured questionnaire. The study employed descriptive including mean and standard deviation and inferential statistics including multiple regression analysis to analyze data. Before regression analysis, the study carried out diagnostic tests such as normality, multicollinearity, linearity, and heteroscedasticity. From the findings, digital payments had a significant positive relationship with financial inclusion. Digital credits and digital savings had an insignificant relationship with financial inclusion. Further, as per the findings, financial literacy had no moderating effect on the relationship between digital financial services and financial inclusion among youth from selected universities in Nairobi City county. The study concludes that digital payments are a key factor that enabled financial inclusion among the youth. It was the recommendation of the study that digital payment service providers should improve the provision of digital payments by eliminating multiple stages of transaction charges that make digital payments expensive. Further, the government of Kenya should aim to eliminate the one percent tax imposed on mobile money, a form of digital payment, which has led to increased cost of mobile money.