nep-fle New Economics Papers
on Financial Literacy and Education
Issue of 2019‒01‒28
four papers chosen by
Viviana Di Giovinazzo
Università degli Studi di Milano-Bicocca

  1. “Information and Financial Literacy for a Socially Sustainable NDC Pension System" By Elsa Fornero; Noemi Oggero; Riccardo Puglisi
  2. Financial Inclusion and Bank Competition in Sub-Saharan Africa By Azanaw Mengistu; Hector Perez Saiz
  3. The Dynamics of Finance-Growth-Inequality Nexus: Theory and Evidence for India By Pranab Kumar Das; Bhaswati Ganguli; Sugata Marjit; Sugata Sen Roy
  4. Borrowing Costs and The Role of Multilateral Development Banks: Evidence from Cross-Border Syndicated Bank Lending By Daniel Gurara; Andrea F Presbitero; Miguel Sarmiento

  1. By: Elsa Fornero (University of Turin and CeRP-Collegio Carlo Alberto); Noemi Oggero (University of Turin and CeRP-Collegio Carlo Alberto); Riccardo Puglisi (University of Pavia)
    Abstract: The accumulation of pension wealth is a long and complex endeavour, with various ‘moments’ in which the individual has to make decisions, even in public systems with a strong compulsory component. Awareness is essential to increase welfare, as citizens are more likely to make sensible choices and avoid regrettable mistakes. Awareness requires both information and the ability to use it wisely; in turn, this requires a minimum economic-financial knowledge, typically called financial literacy. Workers must have some knowledge (conjecture), as precise as possible, of where they stand on their accumulated (prospective) pension wealth and retirement options. This knowledge is less important in the traditional world of DB pension promises, because of their ‘guaranteed’ nature (although the political risk—a risk that people are more likely to ignore, by appealing to the notion of ‘acquired rights’—was never explicitly taken into account and thus covered). Knowledge is instead essential in (N)DC schemes because of their more complicated structure, combined with a higher level of individual responsibility and corresponding risk. In this chapter, we investigate the importance of both information and financial literacy, as they are complementary in achieving a socially sustainable NDC pension system.
    Date: 2018–05
  2. By: Azanaw Mengistu; Hector Perez Saiz
    Abstract: In this paper we study how competition and financial soundness affect financial inclusion in Sub-Saharan Africa (SSA). We use detailed individual-level survey data, combined with key country-level indicators of bank competition and financial soundness, to study the effect on the adoption of several financial products (bank accounts, credit and debit cards, and bank loans). We find that more competition tends to increase the probability of access to these financial products. On the contrary, we do not find strong evidence of the effect of bank-balance sheet variables (i.e. capital adequacy or liquidity) on borrowing by individuals. Our results may help policy makers design regulations that could improve financial inclusion, which could potentially impact economic growth and long-term economic development.
    Keywords: Accounts;Competition;Financial inclusion;Financial soundness indicators;Balance sheets;Sub-Saharan Africa;financial soundness, debit cards, Business Objectives of the Firm
    Date: 2018–12–07
  3. By: Pranab Kumar Das; Bhaswati Ganguli; Sugata Marjit; Sugata Sen Roy
    Abstract: The purpose of this research study has been to expand our understanding of the finance-growth ‘nexus’ to finance-growth-inequality ‘nexus’ in the presence of both the formal and the informal sources of borrowing. Using empirical evidence of IHDS Survey data for two rounds the study attempts to assess the co-evolution of finance-growth-inequality in an intertemporal framework. The most important finding of the paper pertains to the econometric result that the household asset grows at the same rate independent of the source of loans - banks or moneylenders though the level effect (intercept) is higher if the loan is obtained from banks or lower if the household lives below poverty line. The same also holds for the rate of growth of per capita income. There is virtually no significant difference for the households living below poverty line (BPL) on the rate of growth of capital asset or income whether source of borrowing is bank or money lender. This is then formalized in a theoretical model of intertemporal choice of entrepreneur-investor to show that if there are both formal and informal sources of borrowing with a constraint on the formal sector borrowing and no constraint on the latter, then growth rates of asset and income are determined by the informal sector interest rate. The result can be generalised for any number of sources of borrowing. This questions the conventional wisdom regarding the policy aimed at financial inclusion. Inequality of income increases independent of the source of borrowing, though the BPL households are worse off in general.
    Keywords: financial development, financial inclusion growth, inequality, bank, India, IHDS, logit model
    JEL: C35 E50 G21 O11
    Date: 2018
  4. By: Daniel Gurara; Andrea F Presbitero; Miguel Sarmiento
    Abstract: Cross-border bank lending is a growing source of external finance in developing countries and could play a key role for infrastructure financing. This paper looks at the role of multilateral development banks (MDBs) on the terms of syndicated loan deals, focusing on loan pricing. The results show that MDBs' participation is associated with higher borrowing costs and longer maturities---signaling a greater willingness to finance high risk projects which may not be financed by the private sector---but it is also associated with lower spreads for riskier borrowers. Overall, our findings suggest that MDBs could crowd in private investment in developing countries through risk mitigation.
    Keywords: Financial inclusion;Cross-border banking;Microfinance;Borrowing;Multilateral development institutions;Developing countries;inancial inclusion, microfinance, loan expansion program, credit reference bureau
    Date: 2018–12–07

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