The Mediating Effects of Financial Service Usage on the Relationship between Financial Literacy and Retirement Preparedness in the Cameroon Informal Sector (Published)
The last decade has witnessed significant research interest in the area of financial literacy with specific attention on poverty. However, based on evidence of over 80 papers published since 2014 by the Consultative Group to Assist the Poor, it was revealed that there is no significant comprehensive explanation of how the usage of financial services improves people’s financial satisfaction at retirement. To this effect, this study sought to examine the extent to which the usage of both formal and informal financial services affects the retirement preparedness of people engaged in the informal sector of Cameroon. In light of this, the study aimed at justifying the continuous utilization of informal financial services at the expense of formal financial services even when financial service users have access to formal financial services. The study examined individual levels of investment literacy, cash-flow management literacy, credit management literacy, and the usage of formal and informal financial services. The study used the geographical clusters to proportionately select 400 economically active users of financial services from the seven sub-divisions of Yaoundé. Survey data were quantitatively analyzed to test the statistical relationships using the Covariance-Based Structural Equation Model [CB-SEM] with the aid of SPSS and AMOS 24 statistical packages. Findings indicated that the usage of formal financial services and informal financial services hace positive significant statistical effects on retirement preparedness. Also, the study finds that the usage of formal financial services and informal financial services has positive significant mediating effects on financial literacy and retirement preparedness. The study thus proposes the implementation of a dualistiec financial inclusion model that recognizes that both the formal and informal financial services are beneficial in the improvement of individual’s retirement preparedness in the informal sector of Cameroon and as well as in the context of developing countries.
Keywords: Financial literacy, and usage of informal financial services, retirement preparedness, usage of formal financial services