Financial literacy and development experimental insights from rural micro- and small entrepreneurs (mses) in Western Uganda

Financial literacy is the ability to read, analyze, manage and discuss various financial conditions that eventually lead to individuals’ economic well-being. It includes the understanding of different financial choices and making the right financial decisions for better future planning (Stone, 2004; Vitt et al., 2000). This paper presents a quasi- experimental study of a financial literacy intervention with rural micro- and small entrepreneurs (MSEs) in Western Uganda, testing the effects of financial literacy training on savings, borrowing, record keeping and budgeting. The training has induced significant differences between treatment and control group. Significantly more treatment than control group members said that they saved. Only one in three treatment group members reports savings difficulties, down from one in two at baseline, while the control group sees significantly more members with savings difficulties. Amount saved in the last three months, on the other hand, show no significant differences between the groups. Between treatment and follow-up survey, they went up for both groups, 2.5times for treatment and 3.3times for control group. Last but not least, the difference between treatment and control group in budgeting is now significant at 1%-level. The findings confirm that translation of knowledge into behaviours is a process. Whereas provision of knowledge and awareness is possible in a relatively cost-efficient way, changing core behaviours that drive MSE-success is not. For training providers (and funders) it is paramount to focus their efforts on interventions that are directly linked to changing behaviours. We therefore conclude that trainings have to centre on very practical and directly applicable issues rather than knowledge, in line with Drexler et al (2010).