The research results emphasize the influence of financial knowledge and behavior on level of student loan schemes adoption.. Therefore, we decide to research the relationship between fin
OVERVIEW
Necessity of the research
In today's technology-driven world, the promotion of industrialization and modernization is closely linked to the knowledge economy However, many households face challenges in mobilizing financial resources for their children's university education due to economic difficulties caused by epidemics, wars, natural disasters, and inflation With rising tuition fees as universities gain more autonomy under Decree 81, students from low-income backgrounds are at an increased risk of dropping out Consequently, student loan schemes have become essential policy options for higher education, serving as crucial measures to ensure equitable access for all students.
Thi Bich Chau, Chairwoman of the Vietnam Fatherland Front Committee of Ho Chi Minh City, expressed her concern regarding the low percentage of student loans from the Ho Chi Minh City Bank for Social Policies, which stood at only 4.8% of the bank's total outstanding debt as of March 2022 This figure has not improved since 2021 and may even indicate a decline, particularly troubling given the economic hardships faced by students' families following the pandemic This situation raises alarming possibilities: either families are experiencing improved financial conditions, or students are dropping out of school and foregoing loans.
The introduction of supportive policies for student loans in Vietnam addresses urgent financial needs and facilitates access to education These loan schemes, which have evolved since their regulation in 1994, gained significant traction in 2007 following the Prime Minister's issuance of Decision No 157/2007/QD TTg This initiative has resulted in tangible social benefits, with funds being distributed across all 63 branches of the Vietnam Bank for Social Policies (VBSP) nationwide, effectively supporting students in challenging economic conditions.
In 2020, total student credit reached 66.011 billion VND, benefiting over 3.6 million students This credit policy has had significant positive impacts, enhancing the quality of human resources and increasing employment opportunities.
Given the current economic climate, there is an increasing demand for student loans, leading to the expansion of credit programs Nevertheless, a significant number of students remain unaware of or have not utilized these loan options, highlighting a gap in financial literacy among the student population.
The potential of a country's human resources can be significantly hindered by inadequate financial knowledge and poor financial behavior, resulting in missed educational and career opportunities To address this issue, it is essential to prioritize financial education for students, equipping them with the necessary knowledge and skills to thrive in a rapidly changing economic landscape.
Research indicates that college students often possess inadequate financial knowledge, as highlighted by studies from Chen & Volpe (1998) and Mandell (2008) In Vietnam, a report by Dr Dinh Thi Thanh Van and Nguyen Thi Hue (2016) reveals that students in the Hanoi area exhibit only a poor average level of financial literacy Hilgert, Hogarth, and Beverly (2003) emphasize the connection between financial knowledge and behavior across four key activities: cash flow management, credit management, savings, and investment Furthermore, Cliff A Robb and Ann S Woodyard (2011) demonstrate that personal financial knowledge significantly influences behaviors related to financial product usage, particularly in credit management, suggesting that improved financial literacy can lead to more effective use of financial products, including loan schemes.
Despite limited research on the relationship between financial knowledge, behavior, and student loan adoption, this study aims to explore these connections The findings will provide valuable insights for financial institutions to create strategies that enhance the accessibility of loan programs for students, ultimately helping them alleviate financial challenges during their academic journey.
Objectives
The research paper is conducted with the following three objectives:
- Identify research models, testing a scale of financial knowledge, behavior and level of student loan schemes adoption.
Test and measure the correlation between financial knowledge, behavior and level of student loan schemes adoption.
To enhance student loan schemes in Ho Chi Minh City, financial organizations should prioritize improving students' personal financial knowledge and behavior By implementing educational programs that focus on budgeting, saving, and responsible borrowing, these institutions can empower students to make informed financial decisions Additionally, offering tailored loan products that align with students' unique financial situations can further facilitate access to necessary funds Collaborating with educational institutions to provide workshops and resources will also foster a culture of financial literacy, ultimately leading to better loan repayment rates and financial stability for students.
Research Subject and Scope of the research
Research Subject: Influence of personal financial knowledge and behavior on level of student loan schemes adoption.
Respondents: Students living and studying at the university/college in Ho Chi Minh City.
Regarding the geographical range: This study focuses on students living and studying at the university/college in Ho Chi Minh City and the largest nationwide financial institutions.
Execution time: This study is conducted from November 2023 to February 2024.
Research Methodology
This scientific research employs quantitative methods, including the collection and analysis of survey data and model testing Data was gathered from survey questionnaires completed by subjects via Google Forms sent through email, utilizing a random sampling method The study utilized various data processing tools, such as Cronbach's Alpha for scale reliability testing, exploratory factor analysis (EFA) using SPSS 20.0 software, and confirmatory factor analysis (CFA) along with structural equation modeling (SEM) through AMOS 20.0 software.
Research Structure
Chapter 1: Overview: Necessity of the research, Research objective, Research subject and scope, Research methodology, and Research layout, and Research structure.
Chapter 2: Theoretical framework and research model: Literature Review; Concepts; Theory; Related research; Conceptual framework and hypotheses development.
Chapter 3: Research Methodology: Research Process, Sampling Method and Quantitative Research.
Chapter 4: Quantitative Research Result: Sample description, Data Analysis from the questions: Reliability and Validity (Cronbach's Alpha), EFA Analysis, CFA Analysis, SEM Analysis, Structural model evaluation; Results after analyzing data and model; Data analysis result.
Chapter 5: Conclusion and Implications: Conclusion; Research Significance; Implications and proposals to financial organizations; Research limitations and direction in the next research.
Research Implications
The research has both theoretical and practical applications:
+ Enhance the applicability of TPB theory to real research papers.
+ Exploit scholarly resources related to the topic.
+ Apply research methods to current topics.
+ Clarify the relationships between the factors mentioned in the model and test interaction between variables.
The research offers valuable insights for students and financial institutions regarding deposit and lending practices By conducting a thorough analysis of relevant theories, it quantifies and assesses the current usage of loan schemes among students Additionally, it identifies how financial knowledge, behavior, and other factors influence the adoption of these loan schemes, serving as a crucial reference for future studies in this area.
THEORETICAL FRAMEWORK AND RESEARCH MODEL
Concepts
Financial knowledge is crucial for everyday life, as it signifies a person's financial literacy and proficiency Defined simply, financial literacy encompasses an understanding of essential financial concepts, such as simple interest, compound interest, time value of money, inflation's impact on prices, and return on investment According to the OECD, mastering these concepts provides individuals with a clearer assessment of their financial capabilities Moreover, research by Herd et al suggests that financial knowledge also includes an individual's awareness of their financial situation, which is vital for making informed financial decisions.
Financial knowledge is one of the factors that greatly affects a person's behavior in using financial products or services This knowledge includes two types: subjective knowledge and objective knowledge.
Subjective knowledge significantly influences problem-solving abilities, as highlighted by Metcalfe (1986) Individuals with high subjective knowledge tend to exhibit greater confidence in the information stored in their memory, leading them to seek less additional information under the belief that they already possess sufficient knowledge This phenomenon is evident in various aspects, including choice confidence, decision-making time, and service quality assessment, as demonstrated by Park and Lessig (2003) and Andaleeb and Basu.
1994), product search strategy (Moorman, Diehl, Brinberg and Kidwell, 2004) and perceived value (Barrutia and Gilsanz, 2012).
Objective knowledge significantly influences both the capacity and motivation to seek, process, and analyze relevant information, as highlighted in various studies (Cowley and Mitchell, 2003; Hong and Sternthal, 2010; Lee and Lee, 2011; De Bont and Schoormans, 1995; Roy and Cornwell).
2004) Specifically, when customers have good objective knowledge, they will process and evaluate information more effectively, thereby improving their decision-making ability.
The instability of the global economy has led to more complex document identification and an increase in the diversification of financial products As a result, recent studies have focused on the importance of financial management skills in personal life An individual’s decision-making is significantly influenced by their level of understanding, making it crucial for both users and financial institution managers to recognize the impact of knowledge on the usage of financial services.
Financial knowledge and behavior are influenced by various demographic characteristics such as gender, age, income, education level, place of residence, and family background Analyzing these factors helps to identify the distinct financial knowledge levels among different demographic groups, enhancing our understanding of survey respondents and their financial behaviors.
Recent studies indicate notable trends in student credit card usage, highlighting gender differences in behavior Research shows that female students often face higher levels of debt compared to their male counterparts (Micomonaco, 2003) Additionally, previous findings suggest that women generally score lower than men on personal financial knowledge assessments (Chen & Volpe, 1998, 2002; Jones, 2005) However, more recent studies by Wagland and Taylor (2009), Ludlum et al (2012), and Erdogan (2018) reveal that gender has minimal influence on students' financial qualifications.
Age significantly influences financial knowledge, particularly in older individuals whose understanding is closely tied to long-term financial behaviors like saving for investments and retirement Research by Carly Urban and colleagues (2020) highlights that the period between ages 18 and 21, shortly after high school graduation, is crucial for young people as they transition to economic independence During this time, loan programs become particularly appealing, emphasizing the necessity for this age group to possess a solid grasp of financial knowledge to utilize these resources effectively.
A study by Allen et al (2016) utilizing the Global Findex database from 2012 revealed that individual income and education significantly influence personal financial inclusion Additionally, Atkinson et al (2012) established a strong correlation between education and financial literacy, indicating that individuals with higher education and income levels tend to exhibit improved financial attitudes, behaviors, and knowledge Furthermore, research indicates a notable connection between financial knowledge and academic achievement, with college graduates displaying greater financial awareness compared to their undergraduate counterparts.
Financial behavior, a crucial aspect of financial discipline, pertains to the effective management of funds It encompasses how individuals manage cash flow, as highlighted in the field of behavioral finance.
Behavioral finance encompasses essential skills such as financial management, saving, and budget planning Research by Talib et al (2017) indicates that many entrepreneurs fail to utilize these skills, leading to increased rates of failure and bankruptcy This highlights the importance of economic understanding in enhancing financial resource generation and fostering business growth A society well-versed in economic principles is better equipped to create effective financial plans Unfortunately, a lack of financial literacy is a significant factor contributing to poor money management among young people (Aisyah & Wajeeha, 2016).
Recent studies on the financial behavior of youth reveal a broad spectrum of focus and measurement methods Notably, Watson and Barber (2017) assessed young adults' healthy financial habits over the past six months, specifically examining their practices in tracking monthly expenses, adhering to a budget, and saving money for future needs This research highlights the importance of understanding both general and specific aspects of financial behavior among young individuals.
Research has highlighted the negative consequences of financial behaviors, such as stress and loan burden, while also identifying key determinants of healthy financial practices, including financial literacy The predictors of financial behaviors encompass a range of variables, from individual traits like thrill-seeking to family dynamics such as parental financial socialization The varied findings from review articles are systematically categorized based on the explanatory variables that influence future financial behavior.
2.1.4 Level of student loan schemes adoption
The student loan scheme has sparked extensive debate across various fields, including economics, higher education, employment, and politics Study credits, as defined by Jackson (2002), are loans designed to cover essential expenses during education, such as tuition and living costs.
Students often rely on loans to finance their education, covering costs like tuition, textbooks, and computers, as well as living expenses until they finish their degree After graduating, they usually start repaying these loans after a grace period of six to twelve months of employment.
Student loans are defined as funds borrowed to cover post-secondary education and related expenses (Segal, 2022) According to Cochrane & Cheng (2016), these loans are calculated based on the university costs that students are responsible for Essentially, student loans are tailored financial products offered by banks, which are determined by factors such as tuition fees, living expenses, and regional costs The adoption of student loan schemes is influenced by various independent variables, including students' income, tuition rates, living costs, educational level, and accommodation needs (Huynh Thanh Nha, 2015).
Current status of student loan activities of banks in Vietnam
2.2.1 Current loan packages for students
Financial aid policies significantly influence student debt decisions alongside tuition and other expenses (Monks, 2012) Unclear admission requirements can hinder low-income students' access to higher education, further exacerbating student debt levels Monks (2012) also highlighted that financial aid policies impact enrollment differently between private and public institutions, with tuition affecting debt levels at private schools but not at public ones Consequently, it is crucial for students to thoroughly investigate loan options that align with their financial needs and repayment capabilities.
An unsecured loan is a type of financing that does not necessitate collateral or guarantees, allowing borrowers to obtain capital based solely on their legal status and income These loans rely on the borrower's creditworthiness and repayment capability, which are assessed through income and credit checks For students seeking unsecured loans, it is essential to have a job and a steady monthly income to qualify for borrowing.
Unsecured loans typically have terms ranging from 12 to 60 months, tailored to individual needs by various banks and financial institutions The loan amounts are generally modest, with maximum limits reaching between 300 to 500 million VND, contingent upon the borrower's ability to meet all documentation and requirements Interest rates for unsecured loans are relatively high, fluctuating between 8% and 17% per year, and are determined based on the loan amount, the borrower’s credit history, and overall reputation.
People's credit funds, as defined by Clause 6, Article 4 of the 2017 Law on Credit Institutions, are cooperative credit institutions voluntarily formed by legal entities, individuals, and households These funds engage in various banking activities in accordance with the Law on Credit Institutions and the Law on Cooperatives, primarily aimed at supporting members in enhancing their production, business, and overall quality of life Governed by an association of members who both borrow and save, these funds are owned collectively by their members.
The Vietnam Bank for Social Policies offers loans specifically designed to assist students from challenging backgrounds with their educational expenses, including tuition and living costs The loan is typically taken out by a family representative, who is accountable for repayment However, in cases where students face extreme hardships, such as being orphans or having a disabled parent, they are eligible to apply for loans directly from the bank.
Borrowing capital via credit card is a convenient loan option that allows users to access funds up to a predetermined limit set by the bank This alternative is particularly useful for those unable to secure loans from the Bank for Social Policies, as it offers a straightforward application process without the need for collateral However, it's important to note that credit card loans typically come with higher interest rates compared to traditional bank loans Financial institutions like Home Credit and FE Credit provide quick and efficient lending procedures for credit card borrowers.
The state budget allocates charter capital to the Bank for Social Policies (VBSP), which is essential for establishing the bank's fixed assets and facilitating its lending activities Initial funding is provided when the bank commences operations, with additional support granted in subsequent years Annually, VBSP secures state budget funding to support credit programs for social policy borrowers Furthermore, the bank also mobilizes long-term capital through the issuance of domestic and foreign government bonds, although it primarily relies on this source during payment difficulties.
ODA capital offers low-interest, long-term loans that include an extension period, along with technology transfer, expert support, information provision, and training from both governmental and non-governmental organizations in Vietnam This funding source is complemented by loans at varying interest rates, such as those from the State Bank, which can be challenging to access under typical economic and political conditions Typically, the Bank for Social Policies utilizes this preferential loan source to support its lending programs effectively.
Borrowing at market interest rates involves utilizing temporary capital sourced from both domestic and international individuals and organizations This includes funds deposited by state financial and credit institutions, as well as capital mobilized from various market participants The overall size of these capital sources is influenced by the volume of funds available and the strategic plans to offset interest rate differences using the state budget.
2.2.3 Loan term, limit and loan interest rate
The loan term encompasses both the loan disbursement period and the debt repayment period The loan disbursement period begins when the student receives their first loan and lasts until the completion of their course, as defined by VBSP In contrast, the repayment term starts when the student borrows the first loan and continues until the debt is fully paid off Typically, students commence repayment after graduating, securing employment, and generating income However, repaying study loans can take an extended period, as it is influenced by the student's post-graduation employment and income levels.
The loan limit for students is the maximum amount available to help cover living expenses, tuition, and other educational costs while they are enrolled in school This limit is designed to meet students' financial needs during their studies, ensuring they can focus on their education without the burden of financial stress.
Student loan interest rates are typically lower than commercial credit rates for the same duration, often due to state budget support To effectively achieve the objectives of the preferential loan program for students and to enhance capital resources, it is essential to adjust the loan interest rate policy accordingly.
Literature Review
The Theory of Planned Behavior (TPB), developed by Ajzen in 1985, predicts an individual's intention to engage in a specific behavior at a given time and place This theory suggests that behavioral intentions are influenced by three key factors: the individual's attitude towards the behavior, subjective norms, and perceived behavioral control Generally, a stronger intention to perform a behavior increases the likelihood of actually doing it Ajzen's Theory of Reasoned Action further emphasizes the importance of intention in decision-making Consequently, financial behavior significantly influences the adoption of student loan schemes.
Economic theory highlights that consumers must possess knowledge to make choices that maximize their utility, particularly regarding services This study builds on prior research by exploring how general financial knowledge impacts credit behavior and decision-making Specifically, it investigates the influence of financial knowledge on college students' credit usage, taking into account various factors previously identified as affecting their credit utilization.
Economic theory, as proposed by Modigliani and Richard Brumberg in the 1950s, suggests that borrowing can be justified when future income is expected to be significantly higher than current income This approach allows individuals to moderate their consumption and enhance their overall utility College students exemplify this scenario, as they typically have low current incomes but anticipate substantial income growth post-graduation Consequently, students may feel justified in borrowing, even at high interest rates, to maintain a higher standard of living during their college years.
Figure 2.1: Theory of planned behaviour (TPB)
Related Research
2.4.1 Financial Capability of Student Loan Holders Who are College Students, Graduates, or Dropouts - Jing Jian Xiao, Nilton Porto & Irene Me Ivor Mason (2020)
This study investigates the financial capability differences among student loan holders, specifically comparing college students, graduates, and dropouts Utilizing data from the 2015 U.S National Financial Capability Study, the findings reveal that graduates exhibit superior scores across all financial capability indicators when contrasted with their college student and dropout counterparts Further analysis highlights notable differences in financial knowledge among these groups Additionally, college graduates are more inclined to engage in desirable financial behaviors compared to both college students and dropouts.
Research indicates that college graduates consistently outperform both current students and dropouts in various financial capability indicators Specifically, graduates engage in positive financial behaviors more frequently than their peers These findings emphasize the importance of tailored consumer education, as previous studies have highlighted the positive impact of financial education on consumer wellbeing Financial educators should recognize the distinct needs of different student loan holders Furthermore, enhancing the financial skills of college students during their studies could significantly increase their likelihood of graduation, as this education would not only bolster their financial knowledge and behaviors but also support their academic success.
2.4.2 Financial Literacy and Financial Behavior of University Students in
Malaysia - Ahlam Mohd Kamel & Sheerad Sahid (2021)
This study evaluates the financial literacy and behavior of undergraduate students in Malaysia through a quantitative analysis involving questionnaires distributed to 339 public university respondents Utilizing multiple and linear regression methods, the findings reveal a significant correlation between financial literacy and financial behavior Notably, students with higher financial literacy demonstrate better financial management practices, including effective future planning, responsible spending, and consistent savings.
Financial literacy significantly impacts the financial behavior of public university students in Malaysia, with financial education being the most effective means of enhancing this literacy While financial attitudes play a role, financial socialization does not contribute to improvements in financial knowledge This highlights the need for educational policy designers to focus on financial education as a critical strategy for enhancing the financial literacy of university students Consequently, both government and financial institutions should enhance their initiatives to foster a financially literate society Additionally, parents must actively engage in developing their children's financial knowledge and skills from an early age, as the study indicates that parental involvement is a crucial factor in improving financial literacy among students, overshadowing the effects of minimal social influences.
Figure 2.2: Research Model by Ahlam Mohd Kamel & Sheerad Sahid (2021)
Source: Ahtam Mohd Kamel & Sheerad Sahid (2021) 2.4.3 Financial literacy, self-efficacy and risky credit behavior among college students: Evidence from online consumer credit - Liu Liu & Hua Zhang (2021)
This study explores the mediating mechanisms and contextual factors affecting the relationship between financial literacy and risky credit behavior among 539 college students in China's Pearl River Delta Findings reveal that higher financial literacy correlates with reduced risky credit behavior, with subjective financial literacy having a more substantial impact than objective financial literacy Additionally, the influence of financial literacy on risky credit behavior is heightened in the presence of elevated finance-related stress among students.
Examining the risky credit behavior of college students within consumer finance reveals valuable insights for financial education and policy-making This study emphasizes the mediating role of financial self-efficacy in the link between financial literacy and risky credit practices Findings indicate that college students' financial literacy negatively correlates with risky credit behavior, with subjective financial literacy exerting a stronger influence than objective literacy Additionally, the research shows that increased financial stress can drive risky credit behavior among students with low financial literacy Overall, this study enhances the financial literacy discourse by exploring the connections between financial self-efficacy, individual literacy, and consumer credit behavior.
Figure 2.3: Research Model by Liu Liu & Hua Zhang (2021)
Conceptual framework and research hypotheses
2.5.1 The relationship between demographics and financial knowledge
Research on household finance highlights the importance of social factors and demographic characteristics—such as gender, age, educational background, and place of residence—in shaping individual financial behaviors (Beiser, 2003; Karolyi, 2016) These characteristics significantly influence what individuals prioritize when making financial decisions, impacting their overall financial behavior (Karolyi, 2016; Stulz & Williamson, 2003) A person's background can affect critical choices, including the pursuit of higher education, financial habits, student loan usage, and overall financial status (Miller, 2017; Looney & Yannelis, 2015; Lusardi, 2008).
Research indicates that men generally possess greater financial knowledge compared to women, both in family settings (Potrich et al., 2015) and among students, where male students demonstrate higher financial literacy levels than their female counterparts (Lusardi & Mitchell, 2011).
Numerous studies indicate that men generally possess greater financial knowledge than women (Atkinson and Messy, 2012; Dornean, 2012; Drolet, 2016; Karakoẹ & Yesildag, 2017) However, Ozen & Kaya (2015) found that female students can achieve high levels of financial knowledge when provided with equal educational opportunities as their male counterparts This suggests a significant correlation between gender and financial literacy, highlighting the importance of equitable access to financial education.
Age significantly impacts an individual's financial literacy, with studies indicating that different age groups exhibit varying levels of financial knowledge (Le Hoang Anh, 2018) Specifically, adults tend to demonstrate a stronger understanding of financial concepts, which correlates with their long-term financial behaviors, such as saving for investment and retirement Research shows that middle-aged individuals generally possess higher financial literacy than both older adults and teenagers (Atkinson et al., 2012).
The academic year plays a crucial role in shaping students' financial literacy, as it is typically segmented into four distinct periods: first, second, third, and fourth years Research has demonstrated that students' financial knowledge is influenced by their year of study, highlighting the importance of educational progression in financial understanding (Jones, 2005; Menton et al., 2005, 2006; Noor Azizah Shaari et al.).
2013) This finding also supports Samy M et al.'s (2008) study that time spent in college has an impact on students' level of financial knowledge.
The choice of major significantly influences students' financial literacy, with research indicating that those studying economics possess a greater understanding of personal finance compared to their peers in other fields (Chen & Volpe, 1998; Bernheim et al., 2001; Beal & Delpachitra, 2003; Mandell, 2008; Chinen and Endo, 2012) This suggests that students majoring in economics are likely to be better equipped with essential financial knowledge, highlighting the importance of academic specialization in enhancing financial competence.
Research indicates that residence significantly impacts personal financial knowledge Cole et al (2008) discovered that rural Indian students possess higher financial knowledge compared to urban students Additionally, Mohamad (2010) found that students living in rented accommodations exhibit greater financial understanding than those residing with relatives or in private homes, as renting fosters financial independence and necessitates careful budgeting and problem-solving.
Numerous studies indicate a significant relationship between personal income and financial knowledge levels (Clercq et al., 2009; Merwe, 2011) Specifically, higher income levels correlate positively with increased financial literacy (Monticonc, 2010; Hastings and Mitchell, 2011; Ani Caroline Grigion Potrich et al., 2015; Sekar and Gowri, 2015) Furthermore, Atkinson et al (2012) demonstrated through regression analysis that individuals with higher incomes tend to achieve better scores in financial knowledge compared to their lower-income counterparts.
Through the above comments and analysis, realizing the group relationship, we decide to hypothesize:
H x: Demographics have a positive influence on financial knowledge
2.5.2 Relationship between financial knowledge and behavior
Financial knowledge is crucial for students in today's evolving financial landscape, as their financial well-being largely depends on their decisions Young and eager to explore, students often lack the life experience and financial literacy necessary to navigate new products and services, exposing them to potential risks Research by Perry and Morris (2005) indicates that psychological factors, such as locus of control, can influence how financial knowledge affects behavior Furthermore, Gard and Singh (2018) highlight that financial illiteracy breeds uncertainty in managing finances, leading to vulnerabilities like exploitation, increased costs, debt issues, and inadequate retirement savings (Fanta and Mutsonziwa, 2021) With many developed and developing nations facing challenges of low savings rates and high credit card debt, there is a growing emphasis on financial education to prepare the younger generation for future financial challenges.
Financial literacy encompasses the essential knowledge, behaviors, attitudes, awareness, and skills necessary for making informed financial decisions and achieving wealth (OECD, 2012) Research indicates that self-assessed knowledge significantly influences financial behavior (Courchane, 2005), while Chen and Volpe (1998) suggest that an individual's financial literacy level shapes their biases and decision-making For instance, Cude et al (2006) found that students with higher finance test scores tended to manage their credit card balances more effectively and were less likely to own credit cards compared to their lower-scoring peers Furthermore, Borden et al (2008) demonstrated that students' financial knowledge correlates with their financial needs and behaviors, reinforcing the connection between financial literacy and responsible financial practices.
Based on the research of Djou (2019) and Hardiyaanti (2021), financial literacy has a significant impact on financial behavior Therefore, we come to the hypothesis:
H2: Financial knowledge has a positive influence on financial behavior
2.5.3 Relationship between demographics and level of loan schemes adoption
Numerous studies indicate that personal credit usage is significantly influenced by demographic factors, including gender, ethnicity, age, and the current residence of students (Chen and Volpe, 1998).
In 2009, Wickramasinghe and Gurugamage explored credit card usage trends in Sri Lanka, revealing that factors such as income and marital status significantly influence usage behavior Additionally, Draut and Silva (2004) discovered that students from low-income households are more prone to accumulating credit card balances compared to their peers.
A study by Chan (1997) examined the impact of demographic factors on credit card usage in Hong Kong, revealing that income is the primary determinant for consumers The research suggests that enhancing financial incentives and improving convenience can significantly increase credit card adoption Additionally, findings from Abdul-Muhmin and Umar support these conclusions, highlighting the importance of these factors in the region's credit card market.
(2007), Saudi Arabians have a mindset that encourages the use of credit cards and women are more likely to own credit cards than men.
The choice of major significantly impacts students' understanding and usage of credit, with economics students demonstrating a greater awareness of necessary credit levels compared to their peers in other fields According to Xiao et al (2011), these students recognize the advantages of asset accumulation and are often inclined to engage in investment and business activities, which fosters responsible savings and investment management behaviors Additionally, research by Xiao and colleagues (2007) indicates that final-year students tend to be less diligent in managing their credit compared to freshmen.
While numerous studies have investigated students' ability to repay loans, there is a lack of research on the factors influencing student loan amounts The weight of debt creates significant economic pressure on students, limiting their financial freedom and ability to establish independence from their parents Moreover, lower-income students and their families view the risks linked to student loan debt as excessively high, necessitating a careful evaluation of borrowing options.
Through the above arguments, we propose the following hypothesis:
H 3: Demographics have a positive influence on level of student loan schemes adoption
2.5.4 Relationship between financial knowledge and level of student loan schemes adoption
Quantitative Research
The authors conducted a survey to assess the impact of financial knowledge and behavior on credit borrowing among 294 students in Ho Chi Minh City Data analysis involved descriptive statistical methods, including frequency analysis to calculate sample statistics, Cronbach's Alpha to identify and eliminate unreliable scales, and exploratory factor analysis (EFA) to refine observed variables This process grouped the observed variables into factors, which were then utilized in multivariate linear regression analysis to evaluate the influence of financial knowledge and test the model's hypotheses.
For exploratory factor analysis (EFA) and linear regression models, the recommended sample size is calculated using the formula n > 8m + 50, where m represents the number of factor groups (Tabachnick and Fidell, 1996) In this study, the research team surveyed 294 out of 300 students to investigate the effects of financial knowledge and behavior on loan borrowing in Ho Chi Minh City.
Sampling: Data used in the study were collected using convenience sampling method We sent questionnaires to any 300 students in Ho Chi Minh City and selected
294 samples suitable for the research article.
• Part 1: Questions to filter respondents
Including 12 questions with the form of choosing the appropriate answer about whether the survey object belongs to the correct research object of the topic.
Includes 25 questions related to the research topic Questions are rated on a five- point Likert scale to measure the impact of personal financial knowledge and behavior on student loan schemes adoption in Ho Chi Minh City.
Likert scale with five levels from 1 to 5 respectively as follows:
Record personal information of respondents including gender, age, education level, major, university/college, place of residence, income and living expenses, tuition.
The authors utilized SPSS 20.0 and AMOS 20.0 software to encode and process data collected from the survey, employing quantitative research techniques These techniques included reliability testing of the scale, exploratory factor analysis, and regression analysis to evaluate research hypotheses and examine the characteristics of the research sample.
To determine the influence of financial knowledge and behavior on student's level of loan program adoption in Ho Chi Minh City, the data processing process is as follows:
Cronbach's Alpha coefficient is utilized to assess the reliability of a scale by identifying and removing variables or scales that fail to meet the necessary criteria for research, thereby facilitating effective factor analysis.
Cronbach's Alpha coefficient, as noted by Nguyen Dinh Tho (2011), ranges from 0 to 1, with higher values indicating greater reliability of the scale A coefficient exceeding 0.95 suggests that many variables within the scale are redundant, measuring the same research concept Hoang Trong and Chu Nguyen Mong Ngoc (2005) recommend a minimum Cronbach's Alpha of 0.6 for scales addressing new concepts or unfamiliar topics to respondents Furthermore, Nguyen Dinh Tho (2011), referencing Nunnally & Bernstein (1994), asserts that optimal reliability is achieved when the coefficient lies between 0.7 and 0.8, while a coefficient above 0.6 is deemed acceptable.
(2) After testing the scale's reliability by Cronbach's Alpha, the observed variables that meet the requirements will be put into exploratory factor analysis (EFA).
Exploratory factor analysis (EFA) is a statistical method that simplifies a large set of observed variables into fewer, more meaningful factors while retaining the essential information and significance of the original data This technique is crucial for assessing the convergent and discriminant validity of a scale Key considerations in EFA include ensuring that the KMO statistic is above 0.5, the Bartlett test is significant, and that the total variance extracted approaches 50% Additionally, the factor loading coefficients for the observed variables should exceed 0.5 for the analysis to be deemed appropriate.
Linear regression analysis involves establishing a regression model that identifies the influence of each independent variable on the dependent variable This analytical approach helps to quantify the impact of various factors, providing valuable insights into their relationships.
For linear regression coefficient analysis, tests need to note the following:
- Evaluate the appropriateness of the multiple linear regression model using the R2 coefficient and adjusted R2 coefficient.
- Use the Beta coefficient to evaluate the degree of correlation between variables.
- Measure the level of multicollinearity of the model through VIF (Variance Inflation Factor) analysis.
Data analysis techniques
3.3.1 Test the reliability of the scale using the Cronhach’s Alpha coefficient
To ensure the reliability of a research scale and minimize the impact of irrelevant variables, it is essential to utilize Cronbach’s Alpha coefficient, which ranges from 0 to 1 A scale is deemed reliable when its Cronbach's Alpha falls between 0.75 and 0.95, while a reliability score of 0.7 or higher, as suggested by Hair et al (2013), is considered satisfactory Furthermore, a score above 0.6 is acceptable according to Nunnally & Bernstein (1994) Variables with a total correlation coefficient below 0.3 are classified as unsatisfactory and should be excluded from the scale, whereas those meeting or exceeding this threshold are deemed acceptable Subsequent analysis of the reliable observed variables will focus on evaluating their convergence and discrimination.
To assess the reliability of a scale, it is crucial to test Cronbach's Alpha, followed by evaluating its convergent and discriminant validity These tests are vital in confirmatory factor analysis (CFA), as failure to meet the necessary conditions can lead to inaccuracies in the analysis and misrepresentation of data According to Hair et al (2010; 2016), the evaluation of convergence and discrimination can be effectively conducted using the Composite Reliability (CR), Average Variance Extracted (AVE), and Maximum Shared Variance (MSV) indexes, along with Fornell and Larcker tables.
To assess Convergent Validity, Hair et al (2021) state that a composite reliability index (CR) greater than 0.7 and an average variance extracted (AVE) exceeding 0.5 indicate that the latent variable accounts for more than half of the variance in its observed variables, demonstrating good convergence and high reliability Conversely, if AVE is below 0.5 and CR is under 0.7, it suggests that more error exists in the observed variables than the variance explained by the latent variable, indicating insufficient aggregate reliability in the data.
The Fornell and Larcker table, introduced by Fornell and Larcker in 1981, is a widely utilized method for evaluating discriminant validity in research articles and dissertations This traditional approach involves comparing the square root of the average variance extracted (SQRT(AVE)) for a latent variable with the correlation coefficients between that latent variable and other latent variables The average variance extracted (AVE) represents the extent to which a latent variable explains its observed variables.
If Maximum Shared Variance (MSV) < Average Variance Extracted (AVE) and SQRT coefficient( AVE) is larger than the remaining correlation coefficients, we conclude that the scale ensures discrimination.
Variables demonstrating sufficient reliability as indicated by Cronbach’s Alpha will be retained for further analysis through exploratory factor analysis (EFA) This method rigorously assesses the observed variables related to the concepts within the scale, enabling an evaluation of their measurement quality in relation to the research content.
In this study, the research team employed the Principal Axis Factoring extraction method combined with Promax rotation, as recommended by Gerbing & Anderson (1988) This approach is believed to provide a more accurate representation of the data structure compared to the Principal Components extraction method with Varimax rotation.
The criteria used for evaluation in EFA method are as follows:
Factor loading is a crucial aspect in determining the validity of a scale, with a loading factor greater than 0.3 indicating the minimum acceptable level Loadings above 0.4 are deemed important, while those exceeding 0.5 are considered practically significant To ensure convergent validity, observed variables with factor loadings below 0.5 should be removed during Exploratory Factor Analysis (EFA) (Hair et al., 1988).
- KMO coefficient (Kaiser - Meyer - Olkin) is an index used to consider the appropriateness of factor analysis method If the KMO coefficient reaches 0.5 to 1 (0.5
< KMO 0.5, so the scale reaches research significance.
Research model and hypotheses test
The proposed theoretical model was evaluated through SEM analysis after testing the scales in CFA, revealing that all coefficients met the required standards: Chi-square/df = 1.775 (less than 3), CFI = 0.980 (greater than 0.9), GFI = 0.940 (greater than 0.8), and RMSEA = 0.051 (less than 0.08).
Because RMSEA