Financial literacy and personal retirement planning: a socioeconomic approach

Kulondwa Safari,Mugisho Guershom Munkwa,Charity Njoka

doi:10.1108/jbsed-04-2021-0052

Abstract

PurposeThe purpose of this study was to investigate the effect of financial literacy on personal retirement planning in Bukavu city in the Democratic Republic of the Congo (DRC), which is a Sub-Saharan underdeveloped country with a weak pension and social security system.Design/methodology/approachThis study used a structural equation modeling and a sample of 361 public sector employees selected in Bukavu city in the DRC. The data were collected through a survey questionnaire, and the data were analyzed using SPSS and SMART PLS software.FindingsThe results from the study revealed that financial literacy has a significant impact on personal retirement planning. Two constructs of financial literacy, respectively, computation capability and financial knowledge were found to have a significant impact on personal retirement planning, while financial education and attitudes toward financial products were found not significant in explaining personal retirement planning.Practical implicationsThe findings from this study can be used by policy makers in the DRC to design socioeconomic programs, aiming to increase the level of financial literacy in the country and awareness on personal retirement planning.Originality/valueThe reviewed studies were based mostly on developed countries, and countries were the social security system works effectively. We have not found a study on financial literacy and retirement planning that has been conducted in the DRC, which is a country with specific characteristics compared to developed countries.

Highlights

According to the World Bank (2019), in the Democratic Republic of the Congo (DRC), the general literacy rate for adults was estimated to be 77.04% in 2016
The DRC is among countries that offer low retirement benefits; the present research aimed to investigate the effect of financial literacy on personal retirement planning in the DRC
The exploration of the empirical review led to the formulation of the hypothesis that financial knowledge, computation capability, financial education and attitudes toward financial products are the constructs of financial literacy that are more likely to influence personal retirement planning

Summary

Introduction

According to the World Bank (2019), in the Democratic Republic of the Congo (DRC), the general literacy rate for adults was estimated to be 77.04% in 2016. This indicator measures the number of individuals aged 15 and above who can read and write with understanding a short simple communication about their daily life. The government has approved a national financial education program in 2018. This program aims at providing the Congolese population with the financial knowledge that will have a positive effect on their life through improved financial decisions. The World Bank is expected to assist the Central Bank of Congo in putting in practice the important measures to ensure the national financial education program is executed (World Bank, 2018)

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Conclusion