Financial literacy and loan repayment practices in the perspective of grains multi-purpose cooperative borrowers

Abstract

The study determined the financial literacy and loan repayment practices of the 150 random borrowers from the Grain Multi-Purpose Cooperative using two adopted survey questionnaires. The researchers employed a quantitative descriptive method approach. Moreover, correlation analysis was used to assess the strength and direction of the relationship between financial literacy and loan repayment practices. Also, regression analysis was used to determine the degree of influence between the two variables. The results revealed that the borrowers' level of financial literacy is high which contributes to sound decision-making. Meanwhile, the study also found that the following indicators: loan characteristics, credit risk management, and credit history highly influence the level of loan repayment practices of the borrowers. Favorable loan characteristics, good credit management, and credit history result in excellent repaying performance. Thus, the two variables have a significant relationship. However the regression results also found that the degree of financial literacy has a low influence on the loan repayment of the Grains Multi-Purpose Cooperative borrowers. This indicates that borrowers with high financial literacy are more likely to repay loans on time, but financial literacy is not the strongest influence on loan repayment. Finally, the researchers propose that future studies consider and investigate further factors beyond the examined ones in this current research that might have a strong influence on loan repayment more than financial literacy.