Improving loan repayment in Ghana: Does financial literacy matter?

Figures & data

Table 1. Description of variables

Variable	Measurement	A priori expectation
Marital status	Married = 1; Single (comprising never married, divorce and widowed) = 0	Positive
Employment status	Employed = 1; Unemployed = 0	Positive
Gender	Male = 1; Female = 0	Positive
Monthly income (GHS)^7	GHS400.00 and below (R); GHS401.00–GHS600.00; GHS601.00–GHS800.00; GHS801.00–GHS1,000.00; Above GHS1,000.00	Positive
Household size^8	1–2 dependents (R); 3–4 dependents; 5 or more dependents	Negative
Age	18–24 years; 25–39 years; 40–54 years; 55–60 years; Above 60 years (R)	Positive
Education	None; Primary; Junior High School/Middle School Leaving Certificate (JHS/MSLC); Senior High School/Ordinary Level (SHS/O’Level); Tertiary education (R)	Negative
Repayment mode^9	Daily; Weekly; Monthly (R)	Positive

(R) denotes reference category.

Source: Authors’ compilation.

Table 2. Summary of descriptive statistics

Variable	Freq.	Percent	Variable	Freq.	Percent
Age (in years)			Income (GHS)
18–24	100	16.70	GHS400.00 and below	176	29.30
25–39	278	46.30	GHS401.00–GHS600.00	88	14.70
49–54	171	28.50	GHS601.00–GHS800.00	108	18.00
55–60	42	7.00	GHS801.00–GHS1,000.00	118	19.70
Above 60	9	1.50	Above GHS1,000.00	110	18.30
Gender			Marital status
Male	372	62.00	Married	359	59.80
Female	228	38.00	Single	241	40.20
Education level			Financial literacy score
None	19	3.20	1 correct response	40	6.67
Primary	27	4.50	2 correct response	20	3.33
JHS/MSLC	152	25.30	3 correct response	32	5.33
SHS/O’Level	185	30.80	4 correct response	508	84.67
Tertiary	217	36.20
Household size			Repayment mode
1–2	246	41.00	Daily	99	16.50
3–4	200	33.30	Weekly	53	8.83
5 or more	154	25.70	Monthly	448	74.67
Employment status			Loan repayment status
Employed	589	98.20	Successful loan repayment	360	60.00
Unemployed	11	1.80	Defaulted	240	40.00

Source: Authors’ estimation.

Table 3. Binary probit regression results

Variable	Coefficient	Robust standard error	Marginal effect
Financial literacy score	0.3275***	0.0875	0.1251
Income (GHS400.00 and below)
GHS401.00–GHS600.00	0.7065***	0.1903	0.2396
GHS601.00–GHS800.00	0.5905***	0.1848	0.2074
GHS801.00–GHS1,000.00	0.1938	0.1971	0.0725
Above GHS1,000.00	0.2477	0.2069	0.0920
Household size (1–2 dependents)
3–4 dependents	−0.1854	0.1652	−0.0713
5 or more dependents	−0.2053	0.1908	−0.0794
Age (Above 60 years)
18–24 years	0.8196	0.6127	0.2732
25–39 years	1.1746**	0.5946	0.4212
40–54 years	1.4437***	0.6005	0.4545
55–60 years	1.7332***	0.6376	0.4032
Education (tertiary)
None	−1.0240***	0.3971	−0.3852
Primary	−1.3608***	0.3250	−0.4814
JHS/MSLC	−1.2839***	0.1997	−0.4789
SHS/O’Level	−0.9148***	0.1610	−0.3503
Marital Status (single)
Married	0.6789***	0.1471	0.2592
Employment status (unemployed)
Employed	0.6873	0.6039	0.2687
Gender (female)
Male	0.1475	0.1250	0.0566
Repayment mode (monthly basis)
Daily basis	1.4298***	0.2107	0.4085
Weekly basis	0.8122***	0.2439	0.2616
Constant	−3.0835	0.9170	-
Number of observation = 600 Prob > χ^2 = 0.0000 Wald χ^2(20) = 183.78, pseudo R^2 = 0.3162

Reference categories are in parenthesis; *** and ** denote 1 and 5% significance level, respectively.

Source: Authors’ estimation.

Table A1. Binary logistic regression results

Variable	Coefficient	Robust standard error	Marginal effect
Financial literacy score	0.5498***	0.1607	0.1288
Income (GHS400.00 and below)
GHS401.00–GHS600.00	1.1942***	0.3256	0.2387
GHS601.00–GHS800.00	1.0003***	0.3191	0.2090
GHS801.00–GHS1,000.00	0.3099	0.3421	0.0707
Above GHS1,000.00	0.4622	0.3622	0.1036
Household size (1–2 dependents)
3–4 dependents	−0.3630	0.2923	−0.0861
5 or more dependents	−0.3685	0.3370	−0.0879
Age (above 60 years)
18–24 years	1.4541	1.1035	0.2816
25–39 years	2.0434**	1.0735	0.4403
40–54 years	2.5487**	1.0870	0.4651
55–60 years	3.0366***	1.1600	0.3914
Education (tertiary)
None	−1.8115***	0.6940	−0.4145
Primary	−2.3823***	0.5685	−0.5036
JHS/MSLC	−2.2228***	0.3568	−0.5046
SHS/O’Level	−1.5604***	0.2803	−0.3678
Marital Status (single)
Married	1.1602***	0.2555	0.2721
Employment status (unemployed)
Employed	1.1922	1.1247	0.2893
Gender (female)
Male	0.2869	0.2180	0.0677
Repayment mode (monthly basis)
Daily basis	2.4672***	0.3773	0.4029
Weekly basis	1.3807***	0.4413	0.2583
Constant	−5.2876	1.6665	-
Number of observation = 600 Prob > χ^2 = 0.0000 Wald χ^2(20) = 150.62, pseudo R^2 = 0.3171

Reference categories are in parenthesis; *** and ** denote 1 and 5% significance level, respectively.

Source: Authors’ compilation.

Table A2. Reliability test results

Item	Cronbach’s alpha
Financial literacy	0.725
Income – GHS400 and below	0.733
Income – GHS401.00–GHS600.00	0.739
Income – GHS601.00–GHS800.00	0.737
Income – GHS801.00–GHS1,000.00	0.725
Income – above GHS1,000.00	0.707
Household size – 1–2	0.729
Household size – 3–4	0.724
Household size – 5 or more	0.703
Number of children	0.710
Age – 18–24 years	0.737
Age – 25–39 years	0.716
Age – 40–54 years	0.732
Age – 55–60 years	0.739
Age – above 60 years	0.742
Education – None	0.742
Education – Primary	0.744
Education – JHS/MSLC	0.722
Education – SHS/O’Level	0.730
Education – Tertiary	0.712
Repayment mode	0.719
Sector of employment	0.720
Marital status – Single	0.701
Marital status – Married	0.704
Employed	0.720
Unemployed	0.720
Male	0.728
Female	0.728
Test scale	0.734

Source: Authors’ compilation.

Table A3. Multicollinearity test results

Variable	Correlation coefficients
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)
FL (1)	1.000
Inc (2)	−0.059	1.000
Hhs (3)	0.119	−0.052	1.000
Age (4)	0.186	−0.084	0.498	1.000
Educ (5)	0.177	−0.046	−0.102	−0.077	1.000
Mast (6)	0.145	−0.076	0.463	0.529	−0.188	1.000
Empst (7)	−0.097	0.032	−0.067	−0.118	−0.002	−0.105	1.000
Gen (8)	−0.125	−0.001	−0.043	−0.083	−0.204	0.014	0.210	1.000
Repmode (9)	−0.273	0.121	−0.206	−0.256	−0.118	−0.361	0.167	0.099	1.000

Source: Authors’ compilation.