The Assessment of Digital Banking on Financial Inclusion in Ethiopia: A Case Study of Selected Commercial Banks

Abstract

Digital banking involves the digitization of traditional banking services and activities, allowing customers to access financial services through internet-connected devices. Financial inclusion refers to ensuring that individuals and businesses have access to affordable and useful financial products and services such as transactions, savings, credit, and insurance, delivered responsibly and sustainably. These two concepts are closely linked, as digital banking provides an important pathway for enhancing financial inclusion by reducing geographic and financial barriers. It offers convenient and low-cost access to essential services, particularly for people in remote or underserved areas. This study examined the impact of digital banking on financial inclusion in Ethiopia, focusing on selected private commercial banks. Ten banks were chosen from the population of all commercial banks, covering the period 2018 to 2023. A descriptive research design and quantitative approach were applied, using both descriptive statistics and econometric methods, including panel regression analysis. Data were gathered directly from bank records and reports. The findings indicate that internet banking, ATM services, and loan provision each have a significant and positive effect on financial inclusion. However, mobile banking and total assets were found to have no significant effect. The regression model explained 88.9% of the variation in financial inclusion, showing that the combined influence of the examined variables is substantial. The study recommends that banks strengthen efforts to promote internet banking and ATM services, as these are the most impactful drivers of financial inclusion in Ethiopia’s private banking sector.