Influence of Financial Literacy on Financial Management Practices: A Survey of Dairy Farmers Managed By K-Unity Sacco in Limuru Sub County

Abstract

This study purposed to investigate the influence of financial literacy on financial management practices; a survey of dairy farmers managed by K Unity SACCO in Limuru sub county, Kiambu county. The objective of the study was to investigate how financial literacy affects financial management of persons operating in the informal sectors in this case looking at dairy farmers. The researcher sought to find out whether investment practices, saving culture, budgeting practices loan management and the planning of unexpected expenses does affect financial management practices. The field of financial literacy has been understudied more so in the developing economies, and especially in the informal sector. The researcher targeted dairy farmers managed by K Unity SACCO. The researcher adopted descriptive research design to study 356 dairy farmers drawn from a population of 3241 dairy farmers. The study used structured questionnaire which were administered with the help of 5 research assistants using structured interviews. The researcher conducted a pilot test of 20 questionnaires in order to ensure that the questions to be asked were relevant, valid and reliable. Data analysis was done using Statistical Package for Social Scientists (SPSS) to generate descriptive statistics (frequencies, percentages, cross tabulations) that were presented on figures and tables. Further analysis was done using inferential analysis. The study revealed that investment practices and financial management of dairy farmers in Kenya were strongly and positively correlated. Also, investment practices were statistically significant to financial management of dairy farmers in Kenya. Saving culture and financial management of dairy farmers in Kenya were strongly and positively correlated. Also saving Culture was statistically significant to financial management of dairy farmers in Kenya. Budgeting practices and financial management of dairy farmers in Kenya were strongly and positively correlated. Also budgeting practices was statistically significant to financial management of dairy farmers in Kenya. The practice of managing debt and financial management of dairy farmers in Kenya were strongly and positively correlated. Also, debt management practices were statistically significant to financial management of dairy farmers. It was therefore recommended that the management of K Unity Sacco should considered offering investment training to their members before disbursement of loans. The study recommends that employees should use their financial literacy knowledge and experience gained in the Sacco society to develop a saving culture. Also, management of K Unity Sacco should create awareness to its members on the effects of debts on their finances and ways of managing debt realistically and understanding the cost of debt.