The Relationship between Member Financial Literacy and Loan Repayment in Savings and Credit Co-Operative Societies in Uasin-Gishu County, Kenya

Abstract

Financial literacy is the possession of knowledge, skills and attitudes that enable an individual to use money effectively by making sound informed financial decisions, it plays a critical role in Savings and Credit Co-operative Societies (SACCOS). SACCOS are vital financial institutions that encourage thrift to give loans to members; however, Loan Repayment (LR) poses a threat to SACCOS’ sustainability. The main objective of this study was to examine the relationship between Member Financial Literacy (MFL) and LR in SACCOS. Specifically, the study - (i) assessed the MFL in SACCOS (ii) determined the influence of MFL in SACCOS on LR. The study adopted cross-sectional research design whereby 384 members and 147 SACCOS were drawn using simple random sampling techniques. A survey, in-depth interview and Focus Group Discussions (FGDs) were data collection methods. Binary logistic regression was used to analyse quantitative data while qualitative data were analysed using content analysis technique. Results revealed that MFL in SACCOS were low. The MFL were on budgeting, savings, debt management, and bookkeeping. Other indicators of MFL were financial capability, awareness and goal. Attitudes, beliefs and perceived power shaped financial behavior increasing the chances of member LR. The study concludes that MFL was crucial on determining LR. It recommends SACCOS’ board members and managers to provide education on MFL in SACCOS before disbursing any loan and after to improve LR.