Agent Banking Adoption, Financial Literacy, Transaction Costs and Financial Inclusion in Selected Districts of Eastern Uganda
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Date
2023
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Makerere University Business School
Abstract
This study investigates the relationship between agent banking adoption, financial literacy, transaction costs and financial inclusion in Eastern Uganda. It was guided by objectives including; to examine the relationship between financial literacy and financial inclusion; to
examine the relationship between agent banking adoption and financial inclusion; to examine the effect of financial literacy, agent banking adoption on financial; and to examine the mediating
effect of transaction costs in the relationship between financial literacy, agent banking adoption and financial inclusion in Eastern Uganda. Financial literacy, agency bank adoption was the
independent variable, transaction costs mediated the relationship while financial inclusion was the dependent variable. The guiding theories were; unified theory of acceptance and use of
technology model; social learning theory and transaction cost theory.
This study used a cross-sectional research design, with a study population of 564; (Mayuge (80), Butaleja (104) and Iganga (380) users of agency banking services and a sample of 234 selected
randomly. A self-administered questionnaire was used for data collection. Cronbach’s test and content validity Index (CVI) confirmed reliability and validity above 0.7 for all variables. The Statistical Package for Social Sciences (SPSS version 28) was used for data processing to compute frequency, percentages, mean, standard deviations, correlation, and regressions. Results revealed a positive but insignificant relationship between financial literacy and financial
inclusion in Eastern Uganda (r=.071); a positive and significant relationship between agent banking adoption and financial inclusion in Eastern Uganda (r=.154*); a positive but insignificant relationship between transaction costs and financial inclusion (r=.120). Transaction cost is an insignificant mediator in the relationship between agency banking adoption and financial (the indirect effect -0.01 at a significance level of 0.175); the mediation effect is given
by the transaction cost is an insignificant mediator in the relationship between financial literacy and financial inclusion (indirect effect -0.01 at a significance level of 0.283). Financial literacy, agent banking adoption (and transaction costs) predict 3.7% of the variance in financial inclusion in Eastern Uganda (Adjusted R Square=.037). Agency Banking Adoption (Beta=.176, P=.015) and Transaction Costs (Beta=.152, P=.036) significant predictors of financial inclusion in Eastern Uganda; while financial Literacy (Beta=.089, p=.212) was an insignificant predictor of financial inclusion.
The study concludes that in a literate society, it becomes easier, although not a guarantee to have financial inclusion rooted. Improving on agent banking adoption is likely to enhance financial inclusion. A combination of financial literacy and agent banking adoption makes a good strategy bundle to accomplish the financial inclusion mission in society. Efforts to improve financial inclusion through agency banking should never interfere with the costs to let them increase per unit per user, directly or indirectly.
The study recommends that banks should empower agents and end users with capabilities online
or on mobile to accomplish banking activities faster. Banks should ensure that their agent
banking platforms are compatible with other banking systems both today and in future. More
general sensitization should be done to all people to ensure mass adoption of agent banking and
improve on the positive perception in the society. The banks and agents should ensure that the
indirect benefits like convenience, security resulting from use of agent banking are maintained
and upheld; MoUs can be signed between telecom operators and banks to ensure realization
cheap services. Banking agents should be encouraged to help clients beyond the usual routines.
Description
Research Dissertation Submitted to Makerere University Business School (Faculty of Graduate Studies and Research) in Partial Fulfilment of the Requirements for the Award of the Degree of Master of Business Administration of Makerere University. (Plan A).
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Citation
Judith, N. (2023) Agent Banking Adoption, Financial Literacy, Transaction Costs and Financial Inclusion in Selected Districts of Eastern Uganda. Unpublished Masters Dissertation Makerere University Business School. Kampala, Uganda.