Assessing the effects of financial inclusion on income inequality and the moderating role of socio-economic status in Nairobi County

Abstract

Income inequality remained a pressing issue both globally and within Kenya, characterized by significant disparities among socio-economic groups. Despite an increase in financial inclusion, the effects on income inequality were still unclear, particularly in metropolitan areas with substantial economic gaps such as Nairobi County, Kenya. The purpose of this study was to explore the relationship between financial inclusion and income inequality within Nairobi County. The study specifically aimed to determine various aspects of financial inclusion including access to financial services, service quality, and usage-influenced income distribution, and to examine the role of socio-economic status and economic factors in this relationship. A quantitative-correlational research design was employed to observe the existing associations between financial inclusion and income inequality. Using Yamane’s formula at a 95% confidence level, the research sampled a minimum of 393 inhabitants aged 18 years or older. Simple random sampling was utilized to ensure fair and impartial outcomes. Data on financial service access, usage, and income levels were collected through structured survey questionnaires. Descriptive and inferential statistical techniques, including regression analysis, were applied using SPSS to identify meaningful associations and predictors related to income inequality. The findings indicated that income distribution was significantly affected by financial accessibility, while the quality of financial services did not have a notable impact on income distribution. More frequent use of financial services was correlated with lower incomes, and socio-economic status was found to influence the relationship between financial inclusion measures and income inequality. These results underscored the importance of improving access to financial services for low income populations, while also revealing the limitations of focusing solely on service quality or usage. The study concluded that financial inclusion alone was insufficient to bridge the income gap, as broader socio-economic inequalities also needed to be addressed. Therefore, the findings from this research could assist policymakers in developing more comprehensive financial systems and policies that promote sustainable economic growth and reduce disparities in Nairobi County and similar contexts. Keywords: Income Inequality, Financial Inclusion, Socio-Economic Status