Collective action among rural poor: Does it enhance financial intermediation by banks for financial inclusion in developing economies?
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Date
2018
Journal Title
Journal ISSN
Volume Title
Publisher
International Journal of Bank Marketing
Abstract
The purpose of this paper is to establish the mediating role of collective action in the relationship
between financial intermediation and financial inclusion of the poor in rural Uganda.
Design/methodology/approach – The paper uses structural equation modeling (SEM) through bootstrap
approach constructed using analysis of moment structures to test for the mediating role of collective action in the
relationship between financial intermediation and financial inclusion of the poor in rural Uganda. Besides, the paper
adopts Baron and Kenny’s (1986) approach to establish whether conditions for mediation by collective action exist.
Findings – The results revealed that collective action significantly mediates the relationship between financial
intermediation and financial inclusion of the poor in rural Uganda. The findings further indicated that the
mediated model had better model fit indices than the non-mediated model under SEM bootstrap. Furthermore, the
results showed that both collective action and financial intermediation have significant and direct impacts on
financial inclusion of the poor in rural Uganda. Therefore, the findings suggest that the presence of collective
action boost financial intermediation for improved financial inclusion of the poor in rural Uganda.
Research limitations/implications – The study used quantitative data collected through cross-sectional
research design. Further studies through the use of interviews could be adopted in future. Methodologically, the
study adopted use of SEM bootstrap approach to establish the mediating effect of collective action. However, it
ignored the Sobel’s test and MedGraph methods. Future studies could adopt the use of alternative methods of
Sobel’s test and MedGraph. Additionally, the study focused only on semi-formal financial institutions. Hence,
further studies may consider the use of data collected from formal and informal institutions.
Practical implications – Policy makers and managers of financial institutions should consider the role of
collective action in promoting economic development, especially in developing countries. They should create
structures and design financial services and products that promote collective action among the poor in rural Uganda.
Originality/value – Although several scholars have articulated financial inclusion based on both the supply
and demand side factors, this is the first study to test the mediating role of collective action in the relationship
between financial intermediation and financial inclusion of the poor in rural Uganda using SEM bootstrap
approach. Theoretically, the study combines the role of collective action with financial intermediation to
promote financial inclusion. Financial intermediation theory ignores the role played by collective action in the
intermediation process between the surplus and deficit units.
Description
Keywords
Mediating effect, Financial inclusion, Structural equation modelling, Financial intermediation, Collective action, AMOS
Citation
George Okello Candiya Bongomin, John C. Munene, Joseph Mpeera Ntayi, Charles Akol Malinga, (2018) "Collective action among rural poor: Does it enhance financial intermediation by banks for financial inclusion in developing economies?", International Journal of Bank Marketing, https:// doi.org/10.1108/IJBM-08-2017-0174. https://doi.org/10.1108/IJBM-08-2017-0174