Mathematical Modelling of Financial Literacy and Loan Repayment in Savings and Credit Cooperative Societies of Tanzania

Loan Repayment (LR) is one of the key performance indicators in SACCOS. Given the importance of LR, researchers and policymakers have dedicated their attention to the phenomenon by implementing strategies and policies aimed at improving the LR rate to reduce defaulting on loan repayments. To complement the efforts of policymakers, several empirical studies have been conducted regarding LR models. However, few studies exist on the use of mathematical modelling in LR of SACCOS, especially in the Tanzanian context. Therefore, this study seeks to fill this gap, in Tanzania specifically, by modelling the financial literacy (FL) effect on LR using a 2D advection-diffusion equation (ADE). Both primary and secondary data are used in the study. The findings reveal that there is a significant and positive relationship between FL and LR in SACCOS. The mathematical modelling (partial differential equations) indicates the increase of FL in SACCOS members leads to a rise of LR in SACCOS. The findings of the study at hand shed new light on using mathematical modelling especially partial differential equations in modelling FL and LR in SACCOS in the Tanzanian context.