Influence of Financial Literacy on Financial Decisions of Micro Finance Institution Clients in Embu County

Abstract

This study examined the influence of financial literacy on financial decisions of micro finance institution clients in Embu County. Specifically, the study investigated on what influence financial technological literacy, financial investment literacy and financial literacy on sources of finance has on the financial decisions of the micro finance clients. The study targeted all Micro Finance Institutions in Embu County and the targeted population consisted of the clients in the twenty-five registered MFIs in the County but due to homogeneity selected forty respondents in eight MFIs which had a total of 2,168 members as of July 2012. A questionnaire was administered to the sample chosen for the study. The collected data by way of questionnaire was organized to answer set objectives in the study. Data was coded, tabulated in excel and analyzed using statistical package for social sciences (SPSS) computer program. The data was further analyzed using descriptive statistics, frequency tables and percentages. Test of Significance was done by use of Spearman‟s correlation coefficient using inferential statistics. The study observed that financial technological literacy, financial investment literacy and financial literacy on sources of finance had influence on financial decision making of Micro finance Institution Clients. The study further found that majority of the respondents indicated that that the level of financial literacy on MFI operations had made people poorer while majority of them relied on their friends and group members for financial decision making. The study concludes that the stakeholders can attempt to get involved with the efficacy of the MFI programmes by supporting the MFI clients to directly get training specifically on financial literacy or indirectly through a voucher scheme to enable the clients advance their financial management skills.