Women's financial empowerment and financial inclusion in Zambia's informal sector: Evidence from a mixed-methods study

Abstract

This study examines the direct and mediated pathways through which financial literacy and financial empowerment influence financial inclusion among women traders in Lusaka's informal markets, Zambia. The target population comprised 4,028 registered women traders across three major Lusaka markets - Lusaka Food Market, Lusaka City Market, and Soweto Market. Employing a mixed-methods sequential explanatory design underpinned by the Ford Financial Empowerment Model, the Inclusive Financial Wellbeing Empowerment Model, and Sen's Capability Approach, the study collected quantitative data from 273 women traders using stratified random sampling across three major markets, supplemented by three focus group discussions. Structural equation modelling and thematic analysis were used for quantitative and qualitative analyses respectively. Results demonstrate that financial literacy significantly predicts financial empowerment (β = 0.550, p < .01) - the strongest of all pathways tested across the three-paper series - and that financial empowerment significantly predicts financial inclusion (β = 0.389, p < .05). The indirect effect of financial literacy on financial inclusion through financial empowerment was 0.355 (p < .01), establishing empowerment as a powerful mediator that exceeds the capability-mediated indirect effect of 0.250 documented in the companion paper. Qualitative findings from three focus group discussions corroborate these results, with participants identifying confidence in financial management, decision-making autonomy, and savings group participation as key empowerment-driven inclusion pathways, while social norm constraints emerge as the primary boundary condition attenuating the empowerment-to-inclusion relationship. The study concludes that women's financial empowerment is the most potent mediating mechanism in the financial literacy–inclusion nexus in informal markets and recommends the integration of empowerment-building components - specifically confidence development, peer mentoring, and savings group strengthening - into all financial inclusion interventions targeting women in Zambia's informal sector.