Moderating effects of gender on financial literacy and loan repayment behaviour of Small and Medium Enterprises (SMEs) in Kano State, Nigeria

Abstract

The purpose of this research is to examine the moderating effect of financial literacy and loan repayment behavior of small and medium enterprises (SMEs) in Kano State Nigeria. Previous studies suggested that many SME owners lack the financial literacy skills needed to run their business effectively and make accurate financial decisions and yet financial literacy skills help individuals to navigate the financial world and make informed decisions about their money and minimized the chances of   being misled on the matters. Borrowers and business characteristics were used as indicators of loan repayment behavior. Financial literacy which is the independent variable for the study was analyzed in terms of book-keeping literacy, budgeting literacy and debt management literacy. Beneficiaries of financial literacy programme of three microfinance banks namely; Bichi MFB, Dawakin-Tofa MFB and Ungogo MFB were used. The population of the study is 900 beneficiaries that participated in financial literacy programmes but the sample size is chosen to be 90using Kothra technique of determining sample size. Convenient sampling technique was used to access the subjects in administering questionnaire. Data was analyzed using Structural Equation Model (SEM). In line with the expectation, the study established that gender has a positive moderating effect with book-keeping literacy while gender has negative moderating effect on budgeting literacy and debt management literacy in Kano State. On the basis of the findings, it can be concluded that financial literacy awareness need to be intensified to enable SME owners key into it to achieve their business objectives. Thus, it recommended that SME owners should consider enrolling in financial literacy programmes and other related programmes in and outside MFBs so as to enjoy the benefits of financial literacy.