Issues in Business Management and Economics
Vol.1 (7), pp. 176-183, November 2013
Article ID JPR047, 08 pages
Copyright © 2014 Author(s) retain the copyright of this article. Author(s) agree that this article remain permanently open access under the terms of the Creative Commons Attribution License 3.0 International License
Original Research Paper
An analysis of financial literacy as a strategy for minimizing transaction costs of microfinance institutions in Uganda
Kakande Ashe Robert, *Bazinzi Natamba, Nakabuye Zulaika, Brendah Akankunda and Agasha Esther
Faculty of Commerce, Makerere University Business School, Kampala, Uganda.
*Corresponding author E-Mail: bnatamba(at)mubs.ac.ug
The purpose of this study was to examine the relationship between financial literacy and transaction costs. A cross-sectional and quantitative research design was adopted. A total of 286 respondents from 30 microfinance institutions represented the sample size. This was arrived at using simple random sampling technique. Data were analyzed using descriptive statistics, correlation and regression analysis methods were used. Results indicated a significant positive relationship between financial literacy of clients and the transaction costs of MFIs (r= .182, p>.05). Further findings and discussions indicate that financial literacy is a major contributor to the high transaction costs incurred by MFIs. There are however, areas of client’s financial literacy that need to be worked on to enhance financial literacy. It was discovered that clients do not attend seminars or workshops relating to financial planning and invests. Transaction costs were also found to be high in MFIs, implying that MFIs need to come up with better cost allocation strategies of reducing these transaction costs as they try to reach out to these financially literate clients.
Key words: Financial literacy, transaction costs, microfinance institutions, Uganda