TAX INCENTIVES, FORMAL ACCOUNTING PRACTICES, AND FINANCIAL INCLUSION AMONG WOMEN ENTREPRENEURS IN NIGERIA’S INFORMAL SECTOR

Abstract

This study explored how tax incentives, formal accounting practices, and financial inclusion are interconnected among women entrepreneurs in Nigeria’s informal sector. Data from 281 women entrepreneurs in Southwest Nigeria were gathered using structured questionnaires and analysed through descriptive statistics, Pearson chi-square tests, and structural equation modelling. The results showed that most respondents had limited awareness of and utilisation of tax incentives. Business registration was significantly associated with access to tax incentives (χ² = 17.097, p < 0.01), and access to financial services strongly correlated with financial inclusion (χ² = 111.555, p < 0.01). Additionally, adopting formal accounting practices significantly enhanced financial inclusion (χ² = 25.376, p < 0.01). Structural equation modelling revealed that formal accounting practices mediate the link between tax incentives and financial inclusion. Formal accounting acts as a crucial bridge, facilitating the transfer of policy benefits into improved financial outcomes. The study concludes that tax incentives alone are inadequate to increase financial inclusion; they require support from formalisation and stronger accounting practices. Inclusive, formal accounting practices are essential in translating tax incentives into greater financial inclusion for women entrepreneurs. Recommendations include simplifying registration and tax procedures for women and implementing targeted educational campaigns to increase understanding of the benefits of tax reform.