Title: Financial Literacy and its Influence on Credit Usage and Debt Management in Rural Communities of Developing Countries. A case Study of Mufindi District, Tanzania.
Authors: Hawa Jumanne, Eva Kapinga, Yohana Tweve
Volume: 9
Issue: 3
Pages: 139-147
Publication Date: 2025/03/28
Abstract:
- This study examined the relationship between financial literacy, credit usage, and debt management in rural communities of Mufindi District, Tanzania. With a sample size of 182 respondents, the research aimed to understand how financial literacy influenced borrowing behaviors, access to credit, and the ability to manage debt. Data was collected through structured surveys and interviews, exploring key indicators such as awareness of interest rates, loan terms, budgeting, and debt repayment strategies. The study revealed that while a majority of respondents were familiar with informal credit sources, only a limited number had a sound understanding of formal loan terms or effective debt management strategies. Most respondents relied on informal lenders due to their accessibility and fewer requirements, although they faced higher interest rates and repayment challenges. Furthermore, financial literacy was found to be inadequate, with significant gaps in budgeting, interest rate awareness, and debt management skills. The research also identified a high prevalence of late loan repayments, multiple borrowing, and loan defaults, highlighting the risks associated with poor financial literacy and inadequate debt management. Respondents who engaged in budgeting and sought financial advice were more likely to manage debt effectively. Based on these findings, the study recommends the implementation of targeted financial education programs, increased access to formal credit, and the provision of professional financial advice. It suggests that enhancing financial literacy in rural communities could improve credit usage practices and overall debt management, contributing to the financial well-being of individuals and communities in Mufindi District.