The nexus between financial literacy and the credit status in Indonesia

Abstract

The ease of access to financial institutions leads to an increase in the number of both consumptive and productive loans. This increase must be balanced with the process of knowledge transfer about financial management so that customers can manage finances well and can pay credit according to a specified schedule. The objectives of this study are to discover factors influencing financialliteracy, and test the relationship between literacy and credit status, so that it can become a guideline for banking policies in issuing credit. This research utilized 332 samples of credit clients in rural bank credit (RBC). The testing was done with multinomial logistic regression. The research results reveal that the factor which influences finance literacy is level of education. On the other hand, income, amount of loan, and credit status do not have an influence on finance literacy. The credit status (fluid and stalled) does not have a significant relationship towards finance literacy. Thus, the initial assumption that clients who have a fluid credit status will also have a higher literacy level is not proven. There are no differences in stalled credit clients and fluid credit clients in financial literacy