ROLE OF FINANCIAL LITERACY ON HOUSEHOLD INCOME GENERATION AMONG SACCO MEMBERS IN NAROK COUNTY, KENYA

Abstract

An increase in formal financial access has been argued to be one of the fundamental factors to increasing a household's capability to generate income, which is vital for the economic growth of a nation. However, despite a significant rise in formal financial access from 75.5% in 2019 to 83.7% in 2022 in Kenya, household income generation has not improved as anticipated, as over 50% of Kenyans compared to a proportion of only 25-40% in other developing countries, still grapple with extreme poverty, falling below the international poverty line of $1.90 a day as per a 2022 World Bank report. This indicates that the issue at stake may not be financial access only. As a result, researchers needed to examine other issues that might cause this adverse trend in household income generation. To shed light on such issues, the study sought to examine the role of financial literacy on household income generation among SACCO members in Narok County, Kenya. The specific objectives were to determine saving literacy, investment literacy, financial technology literacy, and risk literacy on household income generation among SACCO members in Narok County, Kenya. The study was anchored on the lifecycle theory, behavioral finance theory, technology acceptance model, and capital asset pricing model. Employing a descriptive research design, the study targeted 3,050 registered SACCO members, from which a sample of 217 respondents was selected using stratified and purposive sampling. The study data was collected using a self-administered structured questionnaire and analyzed through descriptive statistics (percentages and means) and inferential statistics (regression and correlation) with the help of SPSS version 27. The simple linear regression model was adopted for the study. The findings revealed that saving literacy (β = 0.46, p < 0.05), investment literacy (β = 0.225, p < 0.05), financial technology literacy (β = 0.386, p < 0.05), and risk literacy (β = 0.090, p < 0.05), had a significant positive role on household income generation. Thus, the study concludes that financial literacy is crucial for increasing household income among SACCO members. By providing individuals with the necessary knowledge and skills, financial literacy enables them to make informed decisions, effectively manage their finances, and pursue opportunities to generate income. The study, therefore, recommends that the government prioritize improving household savings, investmentsliteracy, financial technology literacy, and risk literacy of its households, while also working on improving financial access. This can be achieved through collaborations with SACCOs, financial institutions, and academic entities. Future research could explore the impact of financial behavior and knowledge on income generation across diverse demographics and sectors, including cross-country comparisons, longitudinal studies, qualitative methods, policy evaluations, digital literacy investigations, and industry specific analyses.