Effects of Financial Literacy on loan Repayment among Small and Medium Entrepreneurs of Microfinance Institutions Case Study of Inozamihigo Umurenge Sacco in Nyaruguru District
Journal Title: IOSR journal of Business and Management - Year 2018, Vol 20, Issue 5
Abstract
Microfinance Institutions in Rwanda majorly SACCOs play a significant role in the financial sector and to the economy at large since they empower members through offering loans for business startup. However the performance of these SACCOs in terms of loan repayment has been alarming overtime. Therefore the study sought to analyze the influence of financial literacy on loan repayment among SMEs of Microfinance Institutions a Case of INOZAMIHIGO Umurenge SACCO in Nyaruguru District. Specific objectiveswere to determine how book keeping literacy influence loan repayment among SMEs in Rwanda, to examine how budgeting literacy affect loan repayment among SMEs in Rwanda and to assess how debt management literacy affect loan repayment among SMEs in Rwanda. The study adopted descriptive quantitative research design. A sample of 178 from a population of 320 which comprised of SMEs from INOZAMIHIGO SACCO in Nyaruguru District was calculated using Yamane’s formula. Purposive and simple random sampling techniques were used in choosing population and issuing questionnaires respectively. Data was analyzed using SPSS software Version 20 and presented in form of tables and graphs. Correlation and regression analysis techniques were used to study the relationship and the effects of financial literacy factors on loan repayment among SMEs of Umurenge SACCOs. The findings revealed a high positive correlation between book keeping, budgeting and debt management literacy and loan repayment. Moreover R-squared was 77.2% meaning that the financial literacy factors accounted for greater percentage of loan repayment variations. The study recommended that SACCOs should initiate more financial training to reach all members and encourage all members to attend such trainings. The SACCOs should also employ high qualified trainers to offer quality training to the members. The study recommendations are resourceful to both private and public sectors especially local governments and Umurenge SACCOs to come up with strategic policies that will encourage loan repayment among SMEs. Moreover the study is useful in the field of academia as it adds knowledge on existing literature.
Authors and Affiliations
Musabwasoni Gaudence, Mulyungi Patrick, Muganamfura Denys
Keywords
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- EP ID EP411189
- DOI 10.9790/487X-20050341937.
- Views 71
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