International Journal of Small Business and Entrepreneurship Research (IJSBER)

EA Journals

Urwego

The Role of Financial Literacy on Loan Repayment among Small and Medium Entrepreneurs in Rwanda Case Study: Urwego Opportunity Bank (Published)

The purpose of this research was to examine the impact of financial literacy on loan repayment in Rwanda because previous research suggests that many people lack the skills needed to calculate expected returns or present discounted values, which may cause them to make suboptimal financial decision and yet financial literacy skills enable individuals to navigate the financial world, make informed decisions about their money and minimize their chances of being misled on financial matters. The research was focused on small and medium entrepreneurs in Urwego Opportunity Bank. The researcwh was significant in various ways to individuals/bank clients, investors. Financial literacy therefore is regarded as one of the strategies used by bankers to provide knowledge and skills needed to change attitude and attract more potential users of agent banking. Financial literacy levels amongst SMEs are far too low to deal with the complexities of the matter. The quality of financial information available for financing institutions is rather poor. Credits decisions become difficult and collateral requirements as well as interest rates are high, substantially aggravating access to credit. Controlling the Loan Book is equally difficult. Indeed, banks in Rwanda are increasingly facing non-performing-loans particularly from SMEs. The impacts on the Rwandan economy – almost 90% of all enterprises in Rwanda are micro-enterprises, according to a recent PSF business. The combinations of smaller en¬terprises without access to cash to grow their business and banks, which are increasingly reluctant to lend to smaller clients, hamper much needed economic and social development

Keywords: Financial literacy, Loan Repayment Small and Medium Entrepreneurs, Opportunity Bank, Rwanda, Urwego

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