INTERNATIONAL JOURNAL OF RESEARCH AND SCIENTIFIC INNOVATION (IJRSI)
ISSN No. 2321-2705 | DOI: 10.51244/IJRSI |Volume XII Issue VIII August 2025
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Financial Literacy or Financial Inclusion? Which is Which, What is
What—To Achieve Uganda’s 10-Fold Economic Growth By 2040
Wasike David
Lecturer, Department of Public Administration, Faculty of Business and Management (FBM),
International University of East Africa (IUEA), Doctoral Student, Faculty of Business and Management
(BAM), Uganda Martyrs University (UMU), Kampala, Uganda
DOI: https://doi.org/10.51244/IJRSI.2025.120800144
Received: 20 Aug 2025; Accepted: 26 Aug 2025; Published: 15 September 2025
ABSTRACT
With a goal of increasing GDP tenfold by 2040, Uganda's Vision 2040 seeks swift socioeconomic change.
Low financial literacy remains a major barrier to achieving inclusive economic growth. This challenge exists
despite significant growth in financial inclusion, thanks to innovations in mobile money, community-based
financial institutions, and policy changes. Currently, over 60% of Ugandans use mobile money, and access to
formal financial services rose from 33% in 2018 to 42% in 2023. Still, nearly 60% of people lack basic
knowledge of budgeting, credit management, and investment planning. This gap between access and effective
use limits the transformative potential of financial inclusion. This study explores how financial literacy can
promote economic empowerment and support financial inclusion through a conceptual reflection approach.
Economic transformation is essential for Uganda's goal to increase its GDP tenfold by 2040. Expanding access
to financial services and ensuring that citizens understand how to use these services effectively are both key to
this transformation's success. While more than 60% of people now use mobile money, financial literacy
remains a significant obstacle. A large portion of the population lacks the basic knowledge needed for sound
financial decisions, according to the World Bank (2020) and Bank of Uganda (2022). This reflection shows
that financial literacy is vital for realizing the full potential of financial services in Uganda. The paper
emphasizes the importance of education, collaboration between public and private sectors, and community-
based initiatives in achieving sustainable economic growth. It also offers strategies for integrating financial
literacy into national development plans.
Keywords: Poverty reduction, financial education, mobile money, financial inclusion, financial literacy,
Uganda, Vision 2040, critical theory, capability approach, and financial services.
INTRODUCTION
Uganda aims for rapid economic transformation under Vision 2040. This plan seeks to increase the gross
domestic product (GDP) tenfold by 2040 (National Planning Authority [NPA], 2019). To reach this ambitious
goal, the country needs inclusive economic strategies that allow citizens to take part in the economy. Financial
inclusion, which means making formal financial services like mobile money, bank accounts, savings, and
credit available to everyone, has seen significant progress in recent years. According to the Uganda
Communications Commission (UCC, 2023), more than 60% of Ugandans now use mobile money services.
Access to formal financial services grew from 33% in 2018 to 42% in 2023.
However, simply increasing access does not ensure improved financial well-being. Without enough financial
knowledge, people remain at risk of making poor financial choices, taking on too much debt, and being
exploited by informal lenders (Financial Sector Deepening Uganda [FSDU], 2021). Financial literacy, which is
the ability to make informed financial decisions, is essential alongside financial inclusion. Studies show that
while Uganda has rapidly adopted digital financial platforms, many people struggle to grasp basic financial
concepts like interest rates, budgeting, and investment planning (Bank of Uganda [BoU], 2022).
INTERNATIONAL JOURNAL OF RESEARCH AND SCIENTIFIC INNOVATION (IJRSI)
ISSN No. 2321-2705 | DOI: 10.51244/IJRSI |Volume XII Issue VIII August 2025
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This gap between access and effective use weakens the potential of financial innovations to foster economic
change. Experts suggest that giving citizens financial knowledge improves decision-making, encourages
saving and investment, and supports long-term financial stability (Lusardi & Mitchell, 2014). In this context,
this reflection looks at how incorporating financial literacy into Uganda’s development plans can enhance the
benefits of financial inclusion, promote inclusive growth, and speed up progress toward achieving Vision
2040.
SCOPE AND METHODOLOGICAL POSITION
This paper takes a conceptual reflection approach that relies heavily on secondary data sources to explore the
relationship between financial literacy and financial inclusion in Uganda’s development context. The sources
include government policy documents like the National Financial Inclusion Strategy (Bank of Uganda, 2023),
survey reports from the Uganda Communications Commission (2023), the Financial Sector Deepening Uganda
(FSDU, 2021), and relevant scholarly literature. The reflection combines insights from these materials to
analyze how financial literacy serves as a catalyst for effectively using financial services and achieving long-
term financial empowerment. By bringing together these insights instead of gathering new empirical data, the
study creates a clear narrative of existing knowledge and policy gaps. It aims to support Uganda’s progress
toward Vision 2040 (Uganda National Planning Authority, 2019).
Methodologically, the reflection uses theoretical frameworks to interpret findings and guide the discussion.
Amartya Sen’s capability approach (1999) helps define development as the growth of individuals’ freedoms
and abilities. It shows that having access to financial services is not enough without the knowledge to use them
effectively.
In a similar way, Paulo Freire’s critical theory (2000) offers a perspective to examine systemic inequalities in
financial access and emphasizes the empowering role of financial literacy for marginalized groups. Since this
is not an empirical study, no primary data collection was done. Instead, the methodology focuses on
conceptual synthesis and policy reflection, placing Uganda’s financial inclusion efforts within broader
development theories to provide useful insights for policymakers and practitioners (Creswell, 2013).3.
Theoretical Framework
This reflection uses Amartya Sen’s capability approach to understand the connection between financial
inclusion and financial literacy. According to Sen (1999), real development should focus on expanding
people’s capabilities. This means enhancing their freedom and ability to make choices that improve their well-
being instead of just increasing access to resources. In Uganda’s financial landscape, giving citizens’ access to
financial services like mobile money and credit does not automatically lead to empowerment if they do not
have the knowledge to manage these resources effectively.
Without sufficient financial knowledge, people may find themselves trapped in debt, mishandle their funds, or
fail to take advantage of available opportunities. This limits the transformative potential of financial inclusion
(World Bank, 2020). Therefore, Sen’s framework stresses that improving access must go hand in hand with
teaching people the skills they need to turn financial opportunities into real socio-economic benefits.
Additionally, this reflection incorporates Paulo Freire’s critical theory, which emphasizes the role of education
in breaking down systemic inequalities that contribute to financial exclusion. Freire (2000) states that
empowering marginalized groups involves developing critical consciousness, or the ability to analyze and
challenge oppressive systems. In Uganda’s context, financial literacy acts as a tool for liberation, allowing
individuals to make informed choices, resist exploitative financial practices, and engage actively in economic
systems (Atieno & Nyambura, 2020). Without this empowerment, broader access to financial services may end
up reinforcing existing socio-economic gaps.
By combining Freire’s critical pedagogy with Sen’s capability approach, this reflection views financial literacy
as both a right and a driving force for turning financial inclusion into lasting economic empowerment.
INTERNATIONAL JOURNAL OF RESEARCH AND SCIENTIFIC INNOVATION (IJRSI)
ISSN No. 2321-2705 | DOI: 10.51244/IJRSI |Volume XII Issue VIII August 2025
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Financial Inclusion and Financial Literacy in Uganda
Over the past decade, Uganda has made important progress in expanding financial inclusion. This growth is
mainly a result of advancements in mobile money and the rise of digital financial platforms. According to the
Uganda Communications Commission (2023), more than 60% of Ugandans now use mobile money services.
This marks a significant step in closing access gaps, especially for rural and underserved groups. Likewise, the
availability of formal financial services has improved. The percentage of adults accessing regulated financial
products increased from 33% in 2018 to 42% in 2023 (Bank of Uganda [BoU], 2023).
Savings and Credit Cooperative Organizations (SACCOs) and other community-based financial institutions
have also improved accessibility. They allow smallholder farmers, micro-entrepreneurs, and low-income
households to take part more actively in the financial system (World Bank, 2020). These developments support
Uganda’s National Financial Inclusion Strategy. This strategy focuses on expanding access to affordable and
inclusive financial products, aiming to meet the country’s Vision 2040 goals (NPA, 2019).
Despite this progress, low levels of financial literacy still hinder the full benefits of financial inclusion. A study
by the Financial Sector Deepening Uganda (FSDU, 2021) found that only 35% of Ugandans can create a basic
budget. Only 28% understand how interest rates impact borrowing and saving decisions. While mobile money
use has surged, nearly 40% of users do not have enough knowledge to make the most of transactions or handle
related costs effectively (Bank of Uganda, 2022).
This situation shows a significant gap: having access to financial services does not mean people will use them
effectively or feel empowered. Without focused financial education efforts, individuals risk falling into debt,
mismanaging resources, or not using available products to their full potential, which can worsen existing
vulnerabilities (Lusardi & Mitchell, 2014). Improving financial literacy alongside inclusion efforts is crucial
for achieving lasting economic empowerment and reducing inequalities.
Figure 1: Financial Inclusion and Literacy Gaps in Uganda
DISCUSSION
Bridging the Literacy-Inclusion Gap
To achieve Uganda's Vision 2040, it is essential to bridge the gaps in financial literacy and inclusion. The 2023
FinScope Survey shows that 60% of Ugandans do not understand basic financial concepts like budgeting,
credit, and investment (Financial Sector Deepening Uganda [FSDU], 2023). This lack of knowledge weakens
financial inclusion efforts and limits economic empowerment, especially in marginalized communities.
Incorporating financial literacy into Uganda's inclusion agenda is crucial to help all citizens make informed
financial choices and actively participate in the economy.
INTERNATIONAL JOURNAL OF RESEARCH AND SCIENTIFIC INNOVATION (IJRSI)
ISSN No. 2321-2705 | DOI: 10.51244/IJRSI |Volume XII Issue VIII August 2025
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Education System Reforms
Integrating financial literacy into Uganda's education system is a key strategy for building a more financially
informed population. The Bank of Uganda's Financial Literacy Training of Trainers (FLToT) initiative has
trained over 2,200 educators in more than 75 districts, enabling instruction in over 33 local languages (Bank of
Uganda [BoU], 2023). Adding practical simulations, such as budgeting activities and mock investment
scenarios, to school curricula can improve students' ability to make real-world financial decisions. This
prepares them for active participation in the economy (Atkinson & Messy, 2013).
Public-Private Partnerships
Collaboration between financial institutions and government agencies is vital for promoting financial literacy.
The National Financial Inclusion Strategy (NFIS II) for 2023–2028 aims for at least 85% financial inclusion by
2028. It focuses on underserved groups, including women, youth, and rural populations (Ministry of Finance,
Planning and Economic Development [MoFPED], 2023). Programs like Emyooga and the Parish Development
Model (PDM) should require participants to complete literacy training before accessing funds. This ensures
that beneficiaries have the skills needed to manage financial resources effectively, which will improve the
sustainability and impact of these programs (MoFPED, 2023).
Community-Based Approaches
Community-based strategies are essential for spreading financial literacy in rural and underserved areas.
Organizations like the Uganda Financial Literacy Association (UFLA) engage local leaders and run
decentralized education programs through district chapters (UFLA, 2023). Using Savings and Credit
Cooperative Organizations (SACCOs) and media campaigns helps share financial knowledge widely.
Translating materials into local languages enhances accessibility and understanding, ensuring that financial
literacy programs are inclusive and culturally relevant (UFLA, 2023). According to the Ministry of Finance, by
June 2023, Uganda had 33,000 registered SACCOs, with 6,700 under Emyooga and 10,594 under the Parish
Development Model (PDM). This highlights the wide reach of these community-based financial institutions
(Ministry of Finance, 2023).
REFERENCES
1. Bank of Uganda (BoU). (2022). National Financial Literacy Survey Report. Kampala: BoU.
2. Bank of Uganda (BoU). (2023). Annual Economic Report. Kampala: BoU.
3. Bank of Uganda (BoU). (2023). National Financial Inclusion Strategy. Kampala: BoU.
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(3rd ed.). SAGE Publications.
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12. National Planning Authority (NPA). (2019). National Financial Inclusion Strategy 2020/21–2024/25.
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13. National Planning Authority (NPA). (2019). Uganda Vision 2040: National Development Plan III
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14. Sen, A. (1999). Development as Freedom. Oxford University Press.
INTERNATIONAL JOURNAL OF RESEARCH AND SCIENTIFIC INNOVATION (IJRSI)
ISSN No. 2321-2705 | DOI: 10.51244/IJRSI |Volume XII Issue VIII August 2025
Page 1643
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15. Uganda Communications Commission (UCC). (2023). State of Mobile Money in Uganda. Kampala:
UCC.
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Washington, DC: World Bank Group.
