An empirical analysis of the effectiveness of digital financial services as a panacea to the financial inclusion and growth conundrum faced by Zimbabwean banks

Abstract

Financial inclusion and growth has been a conundrum which a number of stakeholders have attempted to resolve. Among these are governments, regulators, independent bodies and financial institutions. Literature suggests digital financial services as a solution to this quagmire. However, this research found no literature indicating what proportions of this antidote would be ideal to effectively solve the problem. This research attempted to close this gap through an empirical evaluation of the effectiveness of each digital financial service, namely; mobile financial services, debit and credit card support technologies, internet banking and interoperability. The research looked at the effectiveness of each digital financial service to drive financial inclusion and growth underpinned by the Theory of Financial Intermediation; Transaction Cost Theory, Theory of Financial Innovations, and the Theory of Change. A quantitative research was conducted on a sample of 154 bank managers and customers in Zimbabwe and the results were analysed using the Statistical Package for the Social Sciences (SPSS) Version 21 tool. The study effectively answered the research question by establishing that mobile financial services are the most effective digital financial service towards solving the financial inclusion and growth problem, followed by debit and credit card support technology and lastly internet banking whilst interoperability was found to have a negative overall effect. The research recommends that, in order to solve the financial inclusion and growth problem optimally, resources on digital financial services should be allocated on a pro-rata basis. It recommends that 50% of digital financial services resources be allocated to mobile financial services, 31% to debit and credit card support technologies and 19% to internet banking. It also recommends that banks and financial institutions must endeavour to promote interoperability so as to enable it to effectively aid financial inclusion and growth. Furthermore, banks and financial institutions should consider the variant income groups in order to provide relevant financial solutions that help grow financial inclusion and growth. A bevy of policy recommendations were also suggested, chief among them being the need to support innovative digital financial solutions, the restoration of confidence and trust supported by appropriate regulation so as to promote financial inclusion and growth.