The main purpose of this study is to test whether ethical financial behavior as a mediator promotes microfinance inclusion and survival of the poor young women microenterprises in rural Uganda.
The methods recommended by Kenny et al. (1998); Shrout and Bolger (2002); MacKinnon et al. (2004); and Preacher and Hayes (2004) were used to establish the existence of non-zero monotonic association between microfinance inclusion and survival through testing the mediating effect of ethical financial behavior in SmartPLS.
The results from the structural equation modeling revealed a significant full mediating effect of ethical financial behavior in the relationship between microfinance inclusion and survival of the poor young women microenterprises. Microfinance inclusion and ethical financial behavior explain 62 % of the variation in survival of the poor young women microenterprises in rural Uganda.
Whereas significant results were obtained from this study, the data were collected only from rural-based poor young women microenterprises located in northern Uganda. Extending the sample to cover the whole country may provide a more representative picture. Besides, it would be useful to compare results across developing countries as this may provide information about the generality of our findings.
The findings from this study can be useful to managers of microfinance institutions in developing countries to adopt practice that can promote financial discipline among rural poor young women microentrepreneurs. Routine financial education and business mentorship can be organized through workshops, trainings and seminars to teach rural poor young women microentrepreneurs how to manage money, especially business loans borrowed from the microfinance institutions to put it into right use. This can help them to meet timely loan repayment to increase access to future microfinance loans.
This study provides the first evidence on the use of the theory of planned behavior (TPB) and theory of reasoned action (TRA) to explain microfinance inclusion of the poor young women microentrepreneurs in rural Uganda. The study uses a blend of TPB and TRA derived from psychology and sociology to explain repayment intention and ethical behaviors of the poor young women borrowers, which determines the microfinance lending cycle to make microcredit available for them to engage in entrepreneurship to come out of poverty to attain wellbeing.
