Loan defaults continue to be a major challenge that confronts financial
institutions in developing countries and this impedes their potential role in sustainable
development. Given the enormity of loan defaults, policymakers have
devoted much attention to the phenomenon by implementing strategies and policies
aimed at improving loan repayment to avert the situation. To complement the
effort of policymakers, several empirical studies have also been conducted regarding
loan repayment determinants; but what is worrying is that none of these studies
emphasises the role of financial literacy, especially in the Ghanaian context. This
study therefore examines the potential effect of financial literacy on loan repayment.
We rely on primary data and employ the binary probit regression for the
analysis. The results reveal a positive and significant relationship between financial
literacy and loan repayment. This means that enhancing financial literacy improves
loan repayment significantly which will in turn ensure sustainability of the financial
institutions. The level of education of borrowers is also revealed to play a key role in
loan repayment. Given the findings, the study sheds new lights on how loan
repayment can be improved to ensure a vibrant banking sector.
Samuel Tawiah, B (2020). Improving Loan Repayment in Ghana: Does Financial Literacy Matter?. Afribary.com: Retrieved March 06, 2021, from https://afribary.com/works/loan-repayment-and-financial-literacy-cogent-econ-and-finance-2020
Baidoo, Samuel Tawiah. "Improving Loan Repayment in Ghana: Does Financial Literacy Matter?" Afribary.com. Afribary.com, 12 Jul. 2020, https://afribary.com/works/loan-repayment-and-financial-literacy-cogent-econ-and-finance-2020 . Accessed 06 Mar. 2021.
Baidoo, Samuel Tawiah. "Improving Loan Repayment in Ghana: Does Financial Literacy Matter?". Afribary.com, Afribary.com, 12 Jul. 2020. Web. 06 Mar. 2021. < https://afribary.com/works/loan-repayment-and-financial-literacy-cogent-econ-and-finance-2020 >.
Baidoo, Samuel Tawiah. "Improving Loan Repayment in Ghana: Does Financial Literacy Matter?" Afribary.com (2020). Accessed March 06, 2021. https://afribary.com/works/loan-repayment-and-financial-literacy-cogent-econ-and-finance-2020