Financial intermediation and financial inclusion of the poor: Testing the moderating role of institutional pillars in rural Uganda
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Date
2018
Journal Title
Journal ISSN
Volume Title
Publisher
International Journal of Ethics and Systems
Abstract
Drawing from the fact that institutions act as incentives and disincentives to human behaviour
in financial markets, the purpose of this study is to examine the moderating role of institutional pillars in the
relationship between financial intermediation and financial inclusion of the poor in rural Uganda.
Design/methodology/approach – The study used cross-sectional research design and data were
collected from the poor residing in rural Uganda. Statistical package for social sciences was used to analyse
the data. Descriptive statistics, correlations and regression analyses were generated. Besides, ModGraph excel
programme was adopted to graphically explain the moderating role of institutional pillars in the relationship
between financial intermediation and financial inclusion of the poor in rural Uganda.
Findings – The results revealed that institutional pillars of regulative (formal rules), normative
(informal norms) and cultural cognitive (cognition) significantly moderate the relationship between
financial intermediation and financial inclusion of the poor. Furthermore, the results also indicated that
financial intermediation and institutional pillars have significant effects on financial inclusion of the poor
in rural Uganda.
Research limitations/implications – The study focuses on only cross-sectional design, thus, leaving
out longitudinal study. Future research using longitudinal data that explore behaviours of the poor over time
could be useful. In addition, only quantitative data were used to measure variables under study and use of
qualitative data were ignored. Thus, further studies using qualitative data are feasible.
Practical implications – Policymakers and advocates of financial inclusion in a developing country such
as Uganda should adopt institutional pillars (regulative, normative and cultural-cognitive) in promoting
financial intermediation in rural areas. The institutional pillars working in combination set the “rule of the
game” or “humanly devise constraints” that guide economic exchange by promoting and limiting certain
actions of actors in underdeveloped financial market as stipulated by North (1990) and Scott (1995).
Originality/value – To the best of the authors’ knowledge, this is the first attempt to examine the
moderating role of institutional pillars under the theory of institutions in the relationship between financial
intermediation and financial inclusion of the poor in a developing country setting. Indeed, institutions guide
contract enforceability and information sharing in human interaction to lower transaction cost in the financial
markets. This is missing in literature and theory of financial intermediation in promoting financial inclusion,
especially in rural Uganda.
Description
Keywords
Institutional pillars, Financial intermediaries, Poor households, Rural Uganda, Regulative pillar, Rule of the game
Citation
Bongomin, G. O. C., Munene, J. C., Ntayi, J. M., & Malinga, C. A. (2018). Financial intermediation and financial inclusion of the poor: Testing the moderating role of institutional pillars in rural Uganda. International Journal of Ethics and Systems. DOI 10.1108/IJOES-07-2017-0101