The mediating role of savings behavior in the relationship between financial literacy and loan repayment in Rwandan SACCOs. Case study of SACCO Shirubukene Ngoma.

Abstract

This study examines the mediating role of saving behavior in the relationship between financial literacy and loan repayment among U-SACCO’s members Shirubukene Ngoma in Rwanda. To lead the research, a conceptual framework was constructed drawing on the ideas of the financial well-being model and dual process theory. Through inferential and descriptive statistics applied to data acquired from 381 sample customers, the study reveals several significant findings. Firstly, it observes a high degree of financial literacy among U-SACCO clients, with education level favorably correlated with financial literacy. The survey shows a somewhat satisfactory degree of saving behavior among customers, with higher education levels being connected with greater financial responsibility. Furthermore, large positive relationships are identified between financial literacy and both saving behavior and loan repayment. Notably, saving behavior is confirmed to mediate the relationship between financial literacy and loan repayment, with statistical significance. These findings emphasize the necessity of promoting financial literacy and responsible saving habits to enhance loan repayment rates among U-SACCO's clients. The study recommends targeted financial education initiatives and tailored support to empower customers to make informed financial decisions, thereby promoting well-being and financial stability in Rwanda's economic landscape. However, it was noted that while there is a good positive correlation between financial literacy and taking a loan in U-SACCO, other factors beyond financial literacy and saving practice may also influence persons' decisions to take loans from U-SACCO. Further research may be required to explore these factors in more detail.