Nexus between financial literacy and financial inclusion: Examining the moderating role of cognition from a developing country perspective
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Date
2018
Journal Title
Journal ISSN
Volume Title
Publisher
International Journal of Bank Marketing
Abstract
Premised on the argument that cognition structures the way how individuals think and make
decisions, the purpose of this paper is to test the interaction effect of cognition in the relationship between
financial literacy and financial inclusion of the poor in rural Uganda.
Design/methodology/approach – The study used cross-sectional research design and quantitative data
were collected and analyzed using Statistical Package for Social Sciences. Baron and Kenny guidelines were
adopted to test for existence of moderating effect of cognition in the relationship between financial literacy
and financial inclusion of the poor in rural Uganda. Furthermore, ModGraph excel software was used to
establish the magnitude of moderating effect of cognition in the relationship between financial literacy and
financial inclusion of the poor in rural Uganda.
Findings – The results revealed that cognition significantly moderate the relationship between financial
literacy and financial inclusion of the poor in rural Uganda. In addition, both cognition and financial literacy
also have direct effects on financial inclusion of the poor in rural Uganda.
Research limitations/implications – The study adopted cross-sectional research design and data were
collected by use of only questionnaires. Future studies through longitudinal research design may be
employed. Besides, further studies using interviews may be adopted. Furthermore, this study collected data
from only tier 3 financial institutions, thus, ignoring the other financial institutions. Future studies could
focus on financial institutions under the other tiers.
Practical implications – The findings from the study enlightens policy-makers, managers of financial
institutions, and financial inclusion advocates on the importance of cognition in enhancing financial literacy
among the poor, especially in rural Uganda. Cognition combined with financial literacy helps the poor to make
wise financial decisions and choices toward consuming financial services and products provided by formal
financial institutions. This leads to increased scope of financial inclusion of the poor in rural Uganda.
Therefore, advocates of financial literacy should assess community cultural cognition and utilize them to
design and fashion effective financial literacy interventions that can promote financial inclusion.
Originality/value – The study uses Baron and Kenny and ModGraph excel software to test for the
interaction effect of cognition in the relationship between financial literacy and financial inclusion of the poor
in rural Uganda. While several studies exist worldwide on financial inclusion, this study is the first to test the
interaction effect of cognition in the relationship between financial literacy and financial inclusion of the poor
in rural areas in a developing country context.
Description
Keywords
Financial inclusion, Moderating effect, Financial literacy, Poor households, Cultural cognition, Procedural and declarative memories
Citation
Bongomin, G. O. C., Munene, J. C., Ntayi, J. M., & Malinga, C. A. (2018). Nexus between financial literacy and financial inclusion: Examining the moderating role of cognition from a developing country perspective. International Journal of Bank Marketing. DOI 10.1108/IJBM-08-2017-0175