The role of financial literacy on the growth outreach of South African microfinance institutions

With the increased emphasis on financial inclusion by developing countries, the emergence, impact and sustainability of microfinance institutions (MFIs) is considered topical This paper assesses the influence that financial literacy has on the growth outreach of MFIs, from a South African context. U...

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Bibliographic Details
Published inInternational Journal of Research in Business and Social Science Vol. 12; no. 5; pp. 197 - 203
Main Authors Kuchena, Emmanuel, Makoni, Patricia Lindelwa
Format Journal Article
LanguageEnglish
Published Istanbul Society for the Study of Business and Finance 01.01.2023
Subjects
Budgets
Capital
Cost control
Developing countries
Financial inclusion
Financial literacy
Financial services
Institutions
LDCs
Literacy
Literature reviews
Microfinance
Outreach programs
Panel data
Poverty
Small & medium sized enterprises-SME
Small business
Socioeconomic factors
Subsidies
Sustainability
South Africa
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Summary:With the increased emphasis on financial inclusion by developing countries, the emergence, impact and sustainability of microfinance institutions (MFIs) is considered topical This paper assesses the influence that financial literacy has on the growth outreach of MFIs, from a South African context. Using an online questionnaire, we collected data from 44 respondents, representing various MFIs in Limpopo, South Africa. In addition, interviews were conducted with four subjects from the regulatory body, MFSA. We applied panel data fixed effects regression, with binary logit component to measure relationships and effects of the variables under study. According to the results, there was strong consensus that financial literacy of MFI clients, proxied by loan portfolio education, and financial budgeting and investment training offered to MFI clients, improves overall MFI growth outreach, and MFI sustainability in the long run. The contribution of this paper is that, since microfinance institutions by mandate, pursue socio-economic goals, many are not geared towards being financially sustainable. However, with the drying up of grants, donor funds, subsidies and other capital injections into MFIs, it is important for them to implement alternative measures to ensure that their borrowers meet their repayment obligations timeously, hence improving institutional growth and sustainability.
ISSN:2147-4478
DOI:10.20525/ijrbs.v12i5.2657