Exploring Behavioral Finance and Financial Management: Strengthening the Financial Vulnerabilities of Microfinance Borrowers

Abstract

Purpose - This paper investigates the financial behavior and behavioral financial management among microfinance participants, focusing on such dimensions of behavioral finance as personal accounting, herd behavior, emotional gaps, anchoring, and self-attribution, and their effect on budgeting, savings, and expenditure.

Methodology - The research design is quantitative, descriptive-correlational. The selection of 196 respondents was done using a stratified random sampling technique. A structured questionnaire was used for data collection and was developed and improved by adopting various sources to guarantee validity. Descriptive statistics (frequency counts, percentages, and weighted means) and inferential statistics, especially nonparametric correlation coefficients, were used to analyze relationships between variables.

Findings - The results indicate that most respondents are female, aged 30 to 39 years, married, and engaged in livelihood activities such as copra production, shell harvesting, and other informal-sector activities. The majority of the respondents are secondary school graduates and earn a low monthly income. The microfinance involvement is mainly defined by personal loans, which are used for housing mortgages with short-term repayment plans.

Implications and Value - It reveals substantial differences between financial awareness and real financial practices that require specific financial literacy and capacity-building interventions among microfinance participants. By strengthening these areas, financial vulnerabilities can be minimized, and the overall effectiveness of microfinance services can be improved in an effort to promote sustainable livelihoods. It provides useful lessons for financial institutions, development practitioners, and policymakers to create more effective, behaviorally sensitive financial programs. The research also provides a basis for future studies in order to overcome the financial vulnerabilities and enhance the financial resilience of the marginalized groups.