Effect of financial literacy on investment decisions among savings and credit co-operative societies members in Nairobi

Abstract

Many people join SACCOs with a goal of saving and benefiting from SACCOs products such as: easy access to credit, dividends that may be received in favorable circumstances, plan for retirement, ease arrangement for housing or land purchase among others However, this goal is often not met or is partially met due to lack of financial literacy. Therefore, current study sought to examine the effect of financial literacy on investment decision among SACCO members in Nairobi County. Specifically, the study sought to examine the effect of financial knowledge, financial behavior, financial attitude and financial awareness on investment decision among SACCO members drawn from five SACCOs selected purposively in Nairobi County. The study was guided by the dual process, theory of planned behavior, social learning theory and expected utility theory. Purposive sampling was used to select the five SACCOS in Nairobi from which 385 members were drawn through stratified random sampling. Primary data was collected through the use of questionnaires. Regression analysis was carried out to show the nature of the relationship between independent and dependent variables. Results of the study revealed that there was a positive and significant relationship between financial knowledge, financial attitude and investment decision while both financial behavior and financial awareness had positive and non-significant relationship with investment behavior. SACCO should continuously sensitize members on how to improve their financial management skills and attitude as such to foster their investment decision. Although, financial behavior and awareness had positive and insignificant relationship there is need of sensitization sessions to improve financial behavior and adopt customized financial awareness sessions.