The Effect of Microcredit and Financial Literacy on Poverty Reduction in Timor-Leste (A Case Study in Seloi-Aileu District)
Abstract
This research has two main objectives: (1) to test the effect of microcredit on poverty reduction through loan size, loan product and loan repayment in Seloi Aileu District, (2) to test the effect of financial literacy on poverty reduction through financial knowledge, financial behavior and financial attitude in Seloi Aileu District. This research carried out in Seloi Aileu district, 103 questionnaires were used to collect the data from the family who access the microcredit. SPSS was used to test the hypothesis. The findings on microcredit side revealed that loan size and loan products have no impact on poverty reduction, while loan repayment has impact on poverty reduction. In regard to financial literacy, this research showed that financial knowledge and financial attitude have impact on poverty reduction, whilst financial behavior has no impact on poverty reduction in Seloi-Aileu district. The study recommends to making microcredit more inclusive to the poor, more effective and to improve the service by providing more financial literacy training and to improve loan products program.
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