An empirical study on the effects of financial inclusion models for rural poverty reduction in Uganda

Abstract

This study aims to assess the effect of financial inclusion models for rural poverty reduction in Uganda. The study uses propensity score matching, difference in difference (PSM-DID) method and data from villages in Mpigi district, Uganda to quantitatively evaluate the effect of the transformation from VSLAs (Village Savings and Loan Associations) to financial cooperatives (Saemaul Geumgo model of Korea). The results indicate the transformation into financial cooperatives has positive impacts on savings and income increase of members. In addition, the financially excluded, who had not been able to access any financial service before, have joined as members after the establishment of financial cooperatives, resulting to an increase in savings and income level. This study provides a new direction and approach on how to combine and utilize financial models and financial inclusion in the field of development cooperation.