Does financial experience of women owners of micro businesses promote microfinance lending and their continued existence in rural Uganda?

George Okello Candiya Bongomin, Frederick Semukono, Joseph Baleke Yiga Lubega and Pierre Yourougou

Asian Journal of Economics and Banking, 2025, vol. 10, issue 1, 149-171

Abstract: PurposeFinancial experience is very important in today’s dynamic world of constant globalization with the upsurge in sophisticated financial products entering the financial markets, especially in developing countries. This is because it helps the illiterate unbanked poor women owners of micro businesses to make wise financial judgments and options guided by psychology and cognition. This paper aims to ascertain how financial experience can promote microfinance lending and the continued existence of women micro businesses in rural Uganda through an intervening role.Design/methodology/approachThe paper employs a structural equation model through SmartPLS software to ascertain how financial experience can promote microfinance lending and the continued existence of women micro businesses in rural Uganda through an intervening role.FindingsThe empirical findings from this study indicated that financial experience, as a significant and positive mediator, improves microfinance lending and the continued existence of women micro businesses in rural Uganda.Research limitations/implicationsOwing to the geographical ambit of the current study and sample source from only one developing country, future studies may collect data from other regions of the world for comparative analysis to give more insights on the role of financial experience in rural financial markets.Practical implicationsThe government of Uganda should promote financial literacy to enhance the financial experience of women owners of micro businesses to help them make better financial judgements in the rural financial markets. This may increase microfinance lending and the continued existence of vibrant women micro businesses in rural areas. As a result, this could lead to the creation of more jobs for the ever-growing younger population in Uganda.Originality/valueThis study is motivated by the lack of understanding and experience about key financial concepts among more than 3.5 billion adults, mostly women. It applies the Experiential Learning Theory grounded in psychology and cognition to show how the financial experience of women who run micro businesses derived from repeated retrieval of knowledge and reflection, can help them to make sound financial judgments to become financially included by rural-based microfinance institutions. Learning-by-doing allows women owners of micro businesses to repetitively take prudent saving, borrowing and investment selections that help them to generate income to meet timely loan repayment to access more microcredit for the continued existence. This is inadequate in the current theory of microfinance lending in rural financial markets.

Keywords: Financial experience; Women micro businesses; Cognitive skills; Overindebtedness; Microfinance lending; Experiential learning theory (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ajebpp:ajeb-01-2024-0008

DOI: 10.1108/AJEB-01-2024-0008

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