nep-fle New Economics Papers
on Financial Literacy and Education
Issue of 2019‒01‒07
five papers chosen by
Viviana Di Giovinazzo
Università degli Studi di Milano-Bicocca

  1. Financial Inclusion, Financial Regulation, Financial Literacy, Financial Education in the Kyrgyz Republic By Hasanova, Savia
  2. Financial Inclusion: Concepts, Issues and Policies for India By Singh, Nirvikar
  3. A model of endogenous financial inclusion: implications for inequality and monetary policy By Mohammed Ait Lahcen; Pedro Gomis-Porqueras
  4. Financial Inclusion and Macroeconomic Stability in Emerging and Frontier Markets By Vo, A.T.; Van, L. T.-H.; Vo, D.H.; McAleer, M.J.
  5. Effects of Interest Rate Caps on Financial Inclusion By Juan Sebastian Cubillos-Rocha; Luis Fernando Melo-Velandia; María José Roa-García; Juliana Gamboa-Arbeláez; Sara Restrepo-Tamayo; Mauricio Villamizar-Villegas

  1. By: Hasanova, Savia (Asian Development Bank Institute)
    Abstract: While financial inclusion is considered one of the key drivers of development today, it is quite new to the Kyrgyz Republic. The Kyrgyz Republic attempted to introduce the notion of financial inclusion after a violent power shift in 2010. The economy experienced an overall decline, the banking sector shrank, and financial intermediation slowed down. The National Bank introduced a number of regulatory measures to tighten the supervision of the financial sector and increase consumer protection. Some of the efforts have worked well: the banking sector has rebounded, savings have been mobilized, and financial markets have started developing. However, national development patterns, such as unstable economic growth, a high poverty rate, and weak governance are the key vulnerabilities for increasing inclusivity of financial products and services. Income inequality, especially when comparing rural versus urban areas, is substantial and restricts access to financial services for the rural population. Small and medium-sized enterprises face barriers for getting sufficient financing because of high collateral requirements. The population has a low level of financial literacy and is reluctant to use modern financial services. Our analysis suggests an urgent need for consolidated efforts to include more people and businesses into financial activities, mobilize their savings, and improve access to credit.
    Keywords: financial inclusion; financial institutions; government policy and regulation; economic development; financial markets; saving and capital investment; financial literacy; personal savings
    JEL: A20 D04 G02 G21 G28 O16
    Date: 2018–07–05
  2. By: Singh, Nirvikar
    Abstract: This paper lays out some of the basic concepts surrounding financial inclusion, including access to banking, digital payments and financial literacy, as well as markets for health insurance, crop insurance, agricultural credit, small firm finance, and microcredit/ microfinance. It goes on to discuss various empirical and institutional studies of these dimensions of financial inclusion in the context of developing countries. The paper then outlines several recent studies for India which pertain to these specific aspects of financial inclusion. Finally, the paper draws lessons for policy-making and future research directions. Important considerations that emerge from the overview are the significance of social and economic context, the need to consider behavioral biases connected to situations involving time and risk, the interaction of different dimensions of financial inclusion, the importance of details of policy design, and the limited understanding we still have of many of the factors underlying the functioning of financial markets.
    Keywords: financial inclusion, saving, insurance, credit, microfinance, financial literacy, India
    JEL: G21 G22 G38 O16
    Date: 2018–12
  3. By: Mohammed Ait Lahcen; Pedro Gomis-Porqueras
    Abstract: We propose a monetary dynamic general equilibrium model with endogenous credit market participation to study the impact of financial inclusion on welfare and inequality. We find that significant consumption inequality can result from limited access to basic financial services. In this environment, monetary policy has distributional consequences as agents face different liquidity constraints. This heterogeneity generates a pecuniary externality which can result in overconsumption of financially included agents above the socially efficient level. We conduct a quantitative assessment for the case of India. Our simple model is able to account for approximately a third of the observed consumption inequality. We analyze various policies aimed at increasing financial inclusion. As a result of pecuniary externalities, interest rate policies can result in a decrease in welfare and an increase in consumption inequality. Moreover, we find that a direct benefit transfer to bank account owners is superior to interest rate policies as it can increase welfare and reduce consumption inequality despite a decrease in individual consumption.
    Keywords: Money, credit, banking, financial inclusion, inequality
    JEL: E40 E50
    Date: 2018–12
  4. By: Vo, A.T.; Van, L. T.-H.; Vo, D.H.; McAleer, M.J.
    Abstract: Financial inclusion, being considered as a key enabler to reducing poverty and boosting prosperity in emerging and frontier markets such as Vietnam, is the process in which individuals and small businesses are provided with an access to useful and affordable financial products and services. The extant literature on the empirical evidence regarding the contribution of financial inclusion to macroeconomic stability is mixed. This paper investigates the linkages between financial inclusion and macroeconomic stability, which has not yet been thoroughly examined in the literature, for 22 emerging and frontier economies from 2008 to 2015, with particular focus on a potential optimal level. Using the panel threshold estimation technique, the empirical findings show that financial inclusion, as approximated by the growth rate in the number of bank branches over 100,000 account holders, is found to enhance financial stability under a certain threshold. Financial inclusion is also found to be of benefit to maintaining stable inflation and output growth. Policy implications are also discussed on the basis of the important empirical findings.
    Keywords: Financial inclusion, Macroeconomic stability, Panel threshold, Emerging and frontier markets
    JEL: C62 O16 P45
    Date: 2018–12–01
  5. By: Juan Sebastian Cubillos-Rocha (Universidad Nacional de Colombia); Luis Fernando Melo-Velandia (Banco de la República de Colombia); María José Roa-García (CEMLA); Juliana Gamboa-Arbeláez (International Monetary Fund); Sara Restrepo-Tamayo (Banco de la República de Colombia); Mauricio Villamizar-Villegas (Banco de la República de Colombia)
    Abstract: In this paper we study the liberalization of the microcredit usury rate in Colombia and its effects on loan expansion. Namely, in February 2007 the interest rate ceiling for microcredit loans was lifted and fixed to 33%, while the ceiling of all other loans remained unchanged and close to 20%. We perform a Difference-in-Diffeence analysis by comparing the expansion of microcredit loans (treatment group) with that of corporate loans (control group). Additionally, we narrow in on similar levels of both loan size and debtor's risk in order to make microcredit and corporate portfolios more comparable. Our results indicate that this policy encouraged and facilitated financial access to entrepreneurs. Specifically, we find that, on average, the amount lent by credit establishments increased between 21:5% and 42:4%, and the number of new loans increased between 25:1% and 47:8%. **** RESUMEN: En este trabajo estudiamos la liberalización de la tasa de usura de la cartera de microcrédito en Colombia y sus efectos sobre la expansión del crédito. Concretamente, en febrero de 2007 la tasa de usura para la cartera de microcrédito se elevó y se fijó en 33%, mientras que la tasa de usura de las otras carteras se mantuvo cerca al 20%. Realizamos un análisis de Diferencias en Diferencias al comparar la expansión de los créditos de microcrédito (grupo de tratamiento) con la de los créditos comerciales (grupo de control). Adicionalmente, analizamos niveles similares tanto del tamaño del crédito como del riesgo del deudor, con el objetivo de que ambas carteras sean más comparables. Nuestros resultados indican que esta política estimuló y facilitó el acceso financiero a las pequeñas y medianas empresas. Específicamente, encontramos que, en promedio, el monto prestado por los establecimientos de crédito aumentó entre 21.5% y 42.4%, y el número de nuevos créditos aumentó entre 25.1% y 47.8%.
    Keywords: Panel VAR models; bias correction; restricted OLS, Modelos Panel VAR; corrección de sesgo; MCO restringido, Tasa de usura, inclusión financiera, cartera microcrédito, cartera comercial.
    JEL: C33 C51 C13
    Date: 2018–12

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