Financial literacy and profitability of commercial banks in Uganda:

Abstract

This study aimed at determining the effect of financial literacy on profitability of DFCU Bank in Pallisa District with the study objectives; To establish the effect of financial knowledge on profitability of DFCU bank Pallisa branch, to establish the effect of financial behavior on profitability of DFCU bank Pallisa branch, to examine the impact of financial attitude on profitability of DFCU bank, Pallisa Branch in Uganda. The study utilized the contingency theory as suggested by Fred Edward Fielder (1964). In a similar way, the study applied a cross-sectional research design and quantitative approach. The study had a target population of 35 employees in DFCU Bank and collected data from a sample size of 32 respondents as guided by Krejcie and Morgan (1970). Data was collected using close ended questionnaires. Furthermore, data analysis was done using statistical package for social sciences (SPSS) version 20 from which frequency tables, descriptive statistics, reliability, validity, correlation and regression results were obtained. The study findings showed that 21.5% change in profitability is caused by financial knowledge, 54.0% is due to financial behavior and 62.5% is due to financial attitude. Based on the findings of the study, the researcher therefore concludes that financial knowledge, financial behavior and financial attitude have a positive and significant relationship with profitability. The study also concludes that commercial banks are required to have Customer savings on assets in the organization in order to give the highest rate of return hence this can help improve profitability of commercial banks. The study therefore, recommends that DFCU Bank is advised to have Customer savings on assets in the organization in order to give the highest rate of return hence this can help improve profitability of commercial banks.