Financial Services for All? Exploring Financial Inclusion Inequality in Kenya and Tanzania

In low‐/middle‐income countries (LMICs), poorer individuals are characterized by low conventional financial inclusion. Despite digital financial services being praised as a propoor opportunity, recent studies have shown that digital financial service usage is positively associated with wealth. Until now, it remains unknown how unequal financial inclusion in the conventional and comprehensive, that is digital and conventional, financial system truly is and how these inequalities have changed over time. Furthermore, the underlying structure of these inequalities is not well understood, complicating policy development. This study quantifies the evolution and drivers of wealth‐related inequalities in financial inclusion using Kenya and Tanzania as case studies. It employs a concentration index approach and uses data from 2012 and 2020/2024. The results show that prorich inequalities in the financial system persisted over time. However, in Kenya, the more pronounced downward trend in wealth‐related inequality in comprehensive financial inclusion compared to conventional financial inclusion suggests that the expansion of digital financial services may be associated with progress towards a more equitable financial system. Compared to Kenya, average levels of comprehensive financial inclusion in Tanzania remained low. Correspondingly, inequalities in financial inclusion remained pronounced in Tanzania. Prorich inequalities in both countries are mainly explained by prorich biases in infrastructure‐related factors, notably urban location and mobile phone ownership, whereas education also contributes. Given that Kenya and Tanzania follow distinct financial inclusion approaches, our findings are likely to be applicable to other African countries that pursue similar respective trajectories.