Financial Literacy and its Effect on Microfinance Institutions' Financial Performance in Bamenda, Cameroon

Abstract: This study seeks to explore the effect of financial literacy on the financial performance of Microfinance Institutions (MFIs) in Bamenda, Cameroon. Specifically, it has as objective to know the effects of budgeting literacy, credit management literacy, and savings literacy on the financial performance of MFIs in Bamenda, Cameroon. The study adopts a quantitative research approach with the use of structured questionnaires. Through a convenience sampling technique, questionnaires are administered to an adopted sample size of 50 MFIs drawn from 96 registered MFIs located in Bamenda. The data collected is analysed with the use of the Ordinary Least Squares (OLS) method. The results show that budgeting literacy (β=0.6812, p<0.001), credit management literacy (β=0.5083, p<0.001), and savings literacy (β=0.5941, p<0.001) have a positive significant effect on the financial performance of MFIs in Bamenda, Cameroon. It is recommended that MFIs should institute programs or campaigns on financial literacy for their various clients because this will permit them to better manage their finances, lend wisely as well as see the importance of saving which on the other hand will lead to better performance for the MFIs.