The role of financial knowledge in enhancing financial product utilization among youth and women small-medium enterprises in Kisoro and Bushenyi Municipalities, Southwestern Uganda

Abstract

While financial knowledge is gaining traction as an important enabler of quality financial inclusion, youth- and women-owned SMEs in
emerging markets tend to underutilize the financial products available to them. The current study aims to investigate the relationship between financial knowledge and financial product utilization among youth- and women-owned SMEs in Southwestern Uganda, with a particular focus on Kisoro and Bushenyi Municipalities. The study utilized a cross-sectional, correlational research design, and primary data were collected from 395 SME owners and managers using a structured questionnaire. Financial knowledge was assessed based on indicators such as loan management, risk assessment, interest calculation, and inflation awareness. Financial product utilization was measured based on indicators such as savings accounts, mobile money, ATMs, bank transfers, bank loans, and SACCO services. The analysis was done using SPSS software. Principal component analysis was used to construct a financial product utilization index, while Ordinary Least Squares (OLS) estimation was used to test the hypotheses. The results showed a strong and statistically significant positive relationship between financial knowledge and financial product utilization. SMEs with higher levels of financial knowledge were
more likely to access and use formal financial products, especially credit and digital financial services, in a responsible manner. The study offers empirical evidence from the Ugandan SME context and highlights the importance of targeted financial literacy interventions as a complement to financial access efforts. Policy implications include integrating financial education components into SME support programs with a specific focus on women and youth entrepreneurs.