Financial inclusion and poverty reduction among small and medium enterprises in Tanzania: moderating role of digital capability
DOI:
https://doi.org/10.26661/2522-1566/2026-1/35-01Keywords:
financial inclusion, financial institutions, savings accounts, loan services, Automated Teller Machines (ATMs), Digital Capability, Poverty reduction, TanzaniaAbstract
The study examined the impact of financial inclusion on poverty reduction among small and medium-sized enterprise (SME) owners in Tanzania. Specifically, its purpose was to evaluate the effects of access to financial institutions, savings accounts, loan services, and automated teller machines (ATMs) on poverty alleviation outcomes. Additionally, the study has investigated the moderating role of digital capabilities–including digital infrastructure, information management, analytics, operational efficiency, and transformational capacity–in clarifying the relationship between financial inclusion and poverty reduction. The study adopted a cross-sectional explanatory research design grounded in a deductive approach and employed survey techniques for data collection. The multistage, stratified, and simple random sampling procedure was used to select a sample of 381 SME owners across five regions: Dar es Salaam, Mwanza, Arusha, Mbeya, and Mtwara. Primary data were collected using a structured questionnaire. The collected data were analyzed using descriptive statistics, Ordinary Least Squares (OLS) regression, and hierarchical regression analysis.
Findings: Financial inclusion–measured by access to financial institutions, savings accounts, loan services, and ATMs–had a positive and statistically significant effect on poverty reduction among SME owners. Furthermore, digital capabilities were found to play a positive and significant moderating role in the relationship between financial inclusion and poverty reduction, strengthening the observed effects. However, among the financial inclusion components, only savings accounts demonstrated significant interaction effects with digital capabilities.
Practical Implication: Owners of SMEs are encouraged to increase their use of savings accounts, loan services, and ATMs to enhance the effectiveness of financial inclusion initiatives in achieving poverty-reduction outcomes. Policymakers should strengthen financial inclusion by promoting the accessibility, availability, and reliability of financial institutions and related financial services, including savings accounts, loan facilities, and ATMs. Furthermore, both SME owners and financial institutions should prioritize the development and integration of digital capabilities to improve the efficiency and overall impact of financial inclusion strategies in alleviating poverty.
Social Implications: Society should actively promote and utilize the key components of financial inclusion–namely, financial institutions, savings accounts, loan services, and ATMs–as mechanisms to advance poverty reduction efforts. Moreover, the adoption and use of digital financial services should be encouraged to further enhance the effectiveness of financial inclusion in alleviating poverty among SME owners in Tanzania.
Originality: This study is the first to integrate Technology Acceptance Theory with Financial Intermediation Theory to provide a comprehensive explanation of how financial inclusion and digital capabilities jointly contribute to poverty reduction in developing countries.
JEL Classification: G21, O16, L26, O55.
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