Financial inclusion and poverty reduction in Mukuru Slum, Nairobi, Kenya: moderating effect of financial literacy

Abstract

Poverty reduction remains a central development priority across the globe, with African countries experiencing disproportionately high poverty levels. In Kenya's Mukuru Slum, poverty persists as a critical challenge, prompting the need for inclusive financial solutions. This investigation examined how financial inclusion-evaluated through accessibility, utilization and quality dimensions of financial services-affect poverty reduction within Mukuru Slum, with financial literacy functioning as a moderating variable. Employing a cross-sectional research approach, the study analyzed data collected from 357 participants using both descriptive and inferential statistical techniques. The analytical outcomes demonstrated that accessibility, utilization and quality aspects of financial services all exercised significant positive influence on poverty reduction. Additionally, financial literacy was determined to statistically moderate the relationship between financial inclusion components and poverty alleviation, amplifying the effectiveness of all three financial inclusion variables. The research concludes that financial inclusion constitutes a fundamental catalyst for poverty reduction, especially when enhanced by strengthened financial literacy capabilities. The study recommends that policymakers and development actors prioritize expanding financial infrastructure, fostering active usage of financial services through education and innovation, and enhancing the quality and relevance of financial products. A holistic, community-sensitive approach that addresses both access and capability gaps is essential for achieving meaningful and sustainable poverty reduction in informal settlements such as Mukuru Slum. Keywords: Financial Inclusion, Poverty, Poverty Reduction, Financial Literacy