Digital financial inclusion and fiscal solvency in Uganda’s local governments: A review of regulation mediation

Paul Onyango-Delewa,Isaac Nabeta Nkote

doi:10.22437/ppd.v8i6.8861

Paul Onyango-Delewa, Isaac Nabeta Nkote

Open Access

https://doi.org/10.22437/ppd.v8i6.8861

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Abstract

Fiscal solvency has become a popular phenomenon in numerous decentralizing countries in recent years. The ability to mobilize adequate revenue to fund expenditure in a given budget period, and provide public goods and services, makes fiscal solvency very pertinent, especially in local government. However, policy, practice, and research, claim that most local entities, both in the developed and developing world, rarely achieve required fiscal solvency standards. While no clear explanation of the problem abounds, digital financial inclusion dominates the ongoing debate. Besides, regulation is also considered a very crucial factor for fiscal solvency. This study examines the probable mediation effect regulation has on the digital financial inclusion-fiscal solvency relationship in local governments in Uganda, East Africa. Based on a cross-sectional research design, data were collected from 21 districts, nine municipalities, and many sub-counties in the country’s post-conflict northern regions. The data were then subjected to structural equation modeling analysis. Its findings reveal that digital financial inclusion explains changes in fiscal solvency in surveyed local governments. Moreover, regulation has an indirect influence on the digital financial inclusion-fiscal solvency formation. Findings implications to practice and theory are discussed, and future research direction is provided

Highlights

It is quite recent that government entities' fiscal solvency started to receive attention from policy, practice, and research
Restricted to fiscal federalism specialist domains, lack of fiscal solvency has over time undermined resource management in public units unnoticed (Sepulveda & Martinez-Vazquez, 2011; Thornton, 2007)
Descriptive statistical analysis The results reveal that 54% of the 223 participants are male and in the (31-39) year age bracket

Summary

Introduction

It is quite recent that government entities' fiscal solvency started to receive attention from policy, practice, and research. The malaise, exacerbated by corruption and other malpractices, dominates local government financial and budgetary structures, especially in newly decentralizing countries of the developing world (Arzaghi & Henderson, 2005; Lessman, 2012). Gauthier (2001) and Lessman (2012) associate the fiscal health of government (especially local governments) with fiscal solvency. An entity’s fiscal position relates to the state of its assets and liabilities. These require continuous cash flows or the ability for conversion to cash in the short-term (liquidity) (Lessman, 2012)

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