EFFECT OF DEBT LITERACY ON THE OVER-INDEBTEDNESS OF EMPLOYEES WORKING IN THE FORMAL SECTOR OF NEPAL
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Shanker Dev Campus
Abstract
The study aims to investigate the impact of debt literacy on over-indebtedness among
employees in Nepal's formal sector and to examine whether personality traits, such as
materialism and emotions, moderated this relationship. A quantitative research
approach was employed, and convenience sampling was used for data collection.
Surveys were distributed to 386 respondents, and the questionnaire was adapted from
previous studies by Lusardi and Tufano (2009) and Rahman et al. (2020), with
additional questions included to gather demographic details. The collected data were
organized and analyzed using Microsoft Excel and SPSS. Descriptive and inferential
statistical methods, including frequency, percentage, mean, standard deviation,
correlation, and regression analyses, were conducted to address the study's objectives.
The findings revealed that employees in Nepal's formal sector possessed a high level
of basic debt literacy and an above-average level of advanced debt literacy. The
results demonstrated significant associations between components of debt literacy—
such as knowledge of compound interest, the time value of money, and debt
management—and over-indebtedness. Furthermore, the study provided empirical
evidence that materialism and emotions moderated the relationship between
knowledge of compound interest and time value of money with over-indebtedness.
However, these traits did not moderate the relationship between debt management
knowledge and over-indebtedness.
These findings may prove valuable to educational institutions, financial organizations,
individual employees, policymakers, and government bodies. They offer a basis for
developing strategies to enhance debt literacy and reduce the risk of over
indebtedness among employees.