The mediating role of financial literacy on the relationship of digital loan and household budget allocation in City of Manila: Basis for financial decision-making support and resource management polic
- Business Research: (BSBA major in Business Economics) - Pamantasan ng Lungsod ng Maynila, 2023
ABSTRACT: Digital loans have transformed financial accessibility, offering quick and convenient borrowing solutions, particularly for households facing urgent needs. While these loans provide immediate financial relief, their widespread availability raises concerns about potential over-reliance and long-term financial instability. The study investigates the role of financial literacy in mediating the relationship between digital loan accessibility and household budget allocation in Manila City. With the increasing use of digital loans, many households may struggle with managing debt repayment alongside their essential expenditures. This study seeks to determine whether financial literacy enhances responsible borrowing and effective budget allocation, mitigating financial risks associated with digital loans. A survey was conducted among 400 households in Manila City. Findings indicate that digital loan accessibility significantly affects household budget allocation, and financial literacy plays a partial mediating role in this relationship. While financial literacy improves budgeting and borrowing decisions, other factors, such as borrowing behavior and financial constraints, also influence household financial management. The study concludes that digital loans, when used responsibly, can serve as an effective financial tool, but their impact on household budget allocation is influenced by financial literacy. Households with better financial knowledge tend to manage their finances more effectively, reducing the likelihood of financial distress. To promote responsible borrowing, digital lending platforms should integrate real-time loan affordability calculators and pre-loan stress to help borrowers assess their financial capacity and avoid over-borrowing. Community-based financial help desks at the barangay level can offer personalized advice, reducing repetitive borrowing and promoting responsible borrowing habits. Financial literacy programs should focus on debt management and budgeting, empowering borrowers to make informed decisions and improving financial stability.