Financial Inclusion and the Welfare Puzzle: Empirical Evidence from Kenyan Households

Financial inclusion has emerged as a fundamental strategy for improving household welfare and fostering equitable economic growth in emerging nations. Nonetheless, despite enhanced financial inclisin Kenya; especially via mobile money, their direct effect on household social welfare remains ambiguous. This study aimed to evaluate the impact of financial inclusion on household wellbeing in Kenya. The study utilizes nationally representative data from the Afrobarometer survey to analyze critical variables, including ownership of bank accounts, mobile phones, and mobile money accounts. Descriptive statistics indicate extensive digital financial access, with 94.5% of respondents possessing mobile phones and 90.8% maintaining mobile money accounts, although just 50.4% physically own a bank account. Nonetheless, regression analysis indicates no statistically significant correlation between financial inclusion and household welfare (R² = 0.000; p = 0.693), implying that mere access does not guarantee enhanced well-being. Rooted in the Bergson–Samuelson Social Welfare Theory, the study asserts that financial inclusion requires supplementary measures, such as financial literacy, rural infrastructure enhancement, and inclusive lending systems, to yield significant welfare improvements. The results demonstrate that financial inclusion is essential yet insufficient for enhancing social welfare, especially for low-income and excluded groups. Additional research employing multivariate and longitudinal methodologies is advised to enhance comprehension of the circumstances in which financial inclusion results in equitable and enduring welfare advancements.