Bridging the digital financial divide: the role of financial literacy in rural–urban disparities in mobile money account ownership in Tanzania

Abstract

This study explores the role of financial literacy in shaping rural–urban inequalities in Mobile Money (MoMo) account ownership in Tanzania. While digital financial services have expanded rapidly, the findings show that access alone is insufficient for equitable inclusion; the capability to use digital finance effectively remains unevenly distributed. Using data the 2021 Global Findex survey (n = 1,000) and applying the Recentred Influence Function (RIF)-Oaxaca decomposition, the study identifies a 0.150-point rural-urban gap in MoMo ownership. Approximately 67% of this disparity is explained by observable characteristics, with financial literacy accounting for 22.6%, a larger contribution than most other determinants, including mobile phone ownership, internet access and employment status. Regression results further show that the effect of financial literacy strengthens across income levels, highlighting that higher-income users convert financial knowledge into adoption more effectively than the poorest groups. These findings highlight that digital inclusion is both an infrastructural and capacity challenge. Addressing rural–urban and income-based inequalities therefore requires integrating targeted, pro-poor financial literacy initiatives into digital finance policy. Tailored approaches that strengthen foundational financial skills among low-income and rural populations can enhance meaningful engagement with MoMo services and promote more equitable participation in Tanzania’s digital financial ecosystem.