The Role of Digital Financial Literacy for Inclusive Banking in Tanzania

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Technology adoption through digital banking has transformed the delivery of banking services not only in Tanzania but across the globe. Digital banking (DB) as a delivery model has proven to be effective in reducing banks’ operational costs, reaching the unbanked, and ensuring timely and convenient services to the banked. It is evident there are high levels of adoption of this model in developed economies as compared to most developing countries, thus limiting financial inclusion in the banking sector. To explore this phenomenon, this study examines the role of digital financial literacy in influencing the use of digital banking services. In addition, the study examines whether the differences in demographic characteristics affect the relationship between DFL and DB. Applying the Technology Accepted Model (TAM) this study considers digital financial literacy as a factor that influences ease of use in digital banking technology adoption. This study employed a cross-sectional survey that involved a sample of 440 respondents from four regions in Tanzania. The Smart PLS-SEM technique was used for data analysis and testing the study hypotheses. Results indicate digital financial literacy has a positive and significant influence on the use of digital banking. In addition, it was noted that level of income and age have a moderating impact on this relationship. However, differences in gender and residential location have no significant effect on the relationship between DFL and DB. The findings of this study inform policymakers, regulators, and financial services providers on the dimensions of digital financial literacy and how DFL can improve the demand-side capability of consumers. Further, the findings of this study inform the design and delivery of national initiatives on matters related to financial education, financial consumer protection, and digital financial inclusion.