Confirmatory factor modeling on consumer buying behavior of rural credits in rural karnataka: theory of planned behavior as a reference

Many financial institutions including government institutions are grappling up to meet financial/banking demands. One of the hurdles could be lack of understanding consumer’s financial requirements by financial institutions. On the consumer side, many do not have sufficient financial literacy or formal education and lack experience in handling financial products. The result of this gap is leading to slower adaptation of financial products even though higher demand for financial products is a reality. The purpose of the research to explore various items of measurement pertaining to theory of planned behavior. Data was collected from target rural areas for this purpose. EFA was carried to on 27 indicator variables obtained from literature review. Three items were dropped, and six factors were extracted through EFA. Further reliability was established for six factors during EFA. In the next stage, confirmatory factor analysis (CFA) was carried out to establish measurement model fit. Path analysis between item variables and factors was carried out to check for critical ratios. During CFA, reliability test was carried out again using cronbach’s alpha and maximum reliability (H). Followed by convergent and discriminate validity check. The researcher has found that banks need to focus on small borrowers as some of them have good capacity to repay loan with interest. It was observed that regional rural banks have excessive documentation work and also It was observed that rural borrowers still rely heavily on informal loan distributors. The researcher felt that problem of recovery can be resolved through adopting systematic loan applications screening .The researcher suggested based on observation that banks should not be required to furnish any security except personal security