Beyond the bank:

Abstract

Women in Tanzania's informal economy continue to be excluded from the formal financial sector due to a number of factors, primarily income irregularity and the inflexibility of formal financial structures. This paper explores the influence of women's income irregularities on their preference for informal financial institutions like Village Community Banks (VICOBA) and whether perceived financial product flexibility mediates this relationship. The study is based on institutional theory and is concerned with alignment between institutional design and user behaviour. A quantitative cross-sectional study design was used, which included a sample of 403 women aged 20-55 years in Tanzania from three regions: Dodoma, Mwanza, and Mbeya. Study participants were selected by multistage sampling to ensure representation across a wide range of informal economic activities, including farming, trading, and micro-entrepreneurship. Data were collected using structured questionnaires, which included three general constructs: income irregularity, perceived flexibility and preference for VICOBA over formal (formal credit) finance. SmartPLS 4.0 software was used for the analysis of Partial Least Squares Structural Equation Modelling (PLS-SEM). Analysis showed that all hypothesised relationships were statistically significant. Irregularity of income was found to be an important factor influencing women's preference for VICOBA and also determined perceptions of perceived flexibility. Perceived flexibility added another positive contribution to the preference for VICOBA. Mediational analysis supported the partial mediation of perceived flexibility in the relationship between income irregularity and preference for VICOBA, supporting complementary partial mediation. The results emphasise the role of institutional design, and especially flexibility, for the financial behaviour of women with irregular incomes. VICOBA emerges as a rational institutional choice based on the structural and cognitive needs of women in the informal economy. To better serve the financial needs of women, formal financial institutions need to reconceptualise products to reflect income irregularity and incorporate elements of flexibility. Bringing VICOBA and other women's financial institutions into the financial mainstream as legitimate business enterprises would help bridge the gap between formal finance and the economic realities of rural women.