Effects of unconditional cash transfers on financial inclusion: evidence from rural Northern Uganda

Scepticism and hope surround debates about the effectiveness of unconditional cash transfers (UCTs), yet evidence remains inadequate. While existing research has largely examined effects of transitioning from cash to digital transfers, we examine the effects of UCTs in rural Northern Uganda on financial inclusion outcomes beyond the delivery channel. Using Propensity Score Matching, we found that regular monthly UCTs had significant positive effects on access to and use of formal and informal financial services, most pronounced among the women who also received children’s transfers. The formal financial inclusion effects were largest on mobile money, followed by non-deposit-taking and deposit-taking financial institutions. The magnitude of effects on informal financial arrangements was comparable to mobile money, reflecting their significance. We recommend leveraging mobile money and informal financial arrangements to integrate UCTs with financial inclusion initiatives. Future research should use larger, longitudinal, and comparative approaches to examine the intensive-margin and sustainability of effects.