nep-fle New Economics Papers
on Financial Literacy and Education
Issue of 2021‒04‒12
seven papers chosen by

  1. Impacts of the Interest Rate Ceiling on Microfinance Sector in Cambodia: Evidence from a Household Survey By Sovannroeun Samreth; Daiju Aiba; Sothearoath Oeur; Vanndy Vat
  2. Online Banking Users vs. Branch Visitors: Why Are Their Portfolio Returns Different? By Nagano, Mamoru; Uchida, Yuki
  3. Has financial inclusion made the financial sector riskier? By Ozili, Peterson K
  4. Financial Gerontology By Klimczuk, Andrzej; Selecký, Erik
  5. Assessing Sensitivity of Machine Learning Predictions.A Novel Toolbox with an Application to Financial Literacy By Falco J. Bargagli Stoffi; Kenneth De Beckker; Joana E. Maldonado; Kristof De Witte
  6. The impact of financial education of executives on financial practices of medium and large enterprises By Claudia Custodio; Diogo Mendes; Daniel Metzger
  7. The Non-Linear Impact of Digitization on Remittances Inflow: Evidence From the BRICS By Emara, Noha; Zhang, Yuanhao

  1. By: Sovannroeun Samreth; Daiju Aiba; Sothearoath Oeur; Vanndy Vat
    Abstract: This paper examines the effects of the imposition of an interest rate ceiling in the microfinance sector in Cambodia in 2017, based on a household survey undertaken in 2019. Evidence indicates that the average interest rate was reduced after the imposition of the ceiling. Although this reduction is partially offset by the increase of the average loan assessment and processing fee, the average effective interest rate (i.e., credit cost) declined. The results also show the increase in the average loan size from formal sources at a relatively small level and the increase in the percentage of loans from informal sources by a few percentage points. Moreover, we find that relatively low-income households face a higher probability of being rejected for loans and a higher debt service ratio is positively associated with a larger loan amount. This implies the possibility of the increase of the debt burden occurring among relatively small borrowers, given that an increase of the average loan size at relatively small loan levels is observed. The evidence supporting the important role of financial literacy in reducing household debt burden is also confirmed.
    Keywords: Interest rate ceiling, Financial inclusion, Microfinance, Cambodia
    Date: 2021–03–16
  2. By: Nagano, Mamoru; Uchida, Yuki
    Abstract: This study investigates why portfolio returns of online banking users are higher than those of non-online users. We first demonstrate that households that are eager to improve their level of financial literacy are more likely to use online banking. Second, a marginal increase in risk appetite increases portfolio returns of online users; however, this is not the case for non-online users. Third, online banking promotes debt repayment, and this further encourages risk tolerant investments. In sum, we conclude that financial literacy efforts moderate a positive relationship between use of online banking, risk appetite, and portfolio returns. The positive relationship between use of online banking and debt repayment further increases risk appetite.
    Keywords: Online Banking;Portfolio Investmen;Risk Appetite;Debt Repayment;Mortgage Debt
    JEL: G00 G02 G11
    Date: 2021–04–01
  3. By: Ozili, Peterson K
    Abstract: This paper examines whether high levels of financial inclusion is associated with greater financial risk. The findings reveal that higher account ownership is associated with greater financial risk through high nonperforming loan and high cost inefficiency in the financial sector of developed countries, advanced countries and transition economies. Increased use of debit cards, credit cards and digital finance products reduced risk in the financial sector of advanced countries and developed countries but not for transition economies and developing countries. The findings also show that the combined use of digital finance products with increased formal account ownership improves financial sector efficiency in developing countries while the combined use of credit cards with increased formal account ownership reduces insolvency risk and improves financial sector efficiency in developing countries.
    Keywords: financial inclusion, digital finance, Fintech, financial technology, nonperforming loans, efficiency, financial innovation, insolvency risk, credit card, debit card, formal accounts, account ownership, black swan
    JEL: G21 G28 O31
    Date: 2021
  4. By: Klimczuk, Andrzej; Selecký, Erik
    Abstract: Financial gerontology can be defined as investigating relations between finances and aging. Authors such as Neal E. Cutler, Kouhei Komamura, Davis W. Gregg, Shinya Kajitani, Kei Sakata, and Colin McKenzie (Kajitani et al. 2017) affirm that financial literacy is an effect of aging with concern about the issue of finances, as well as stating that it is the effect of longevity and aging on economies or the financial resilience of older people.
    Keywords: Financial Gerontology
    JEL: G29 J14
    Date: 2020
  5. By: Falco J. Bargagli Stoffi; Kenneth De Beckker; Joana E. Maldonado; Kristof De Witte
    Abstract: Despite their popularity, machine learning predictions are sensitive to potential unobserved predictors. This paper proposes a general algorithm that assesses how the omission of an unobserved variable with high explanatory power could affect the predictions of the model. Moreover, the algorithm extends the usage of machine learning from pointwise predictions to inference and sensitivity analysis. In the application, we show how the framework can be applied to data with inherent uncertainty, such as students' scores in a standardized assessment on financial literacy. First, using Bayesian Additive Regression Trees (BART), we predict students' financial literacy scores (FLS) for a subgroup of students with missing FLS. Then, we assess the sensitivity of predictions by comparing the predictions and performance of models with and without a highly explanatory synthetic predictor. We find no significant difference in the predictions and performances of the augmented (i.e., the model with the synthetic predictor) and original model. This evidence sheds a light on the stability of the predictive model used in the application. The proposed methodology can be used, above and beyond our motivating empirical example, in a wide range of machine learning applications in social and health sciences.
    Date: 2021–02
  6. By: Claudia Custodio; Diogo Mendes; Daniel Metzger
    Abstract: This paper studies the impact of a course in finance for executives of medium and large enterprises through a randomized controlled trial (RCT) in Mozambique. Survey data and accounting data provide consistent evidence that managers change firm financial policies in response to finance education. The largest treatment effect is on short-term financial policies related to working capital. Reductions in accounts receivable and inventories generate an increase in cash flows used to finance long-term investments. Those changes also improve the performance of the treated firms. Overall, our results suggest that relatively small and low-cost interventions, such as a standard executive education program in finance, can help firms to mitigate financial constraints and potentially affect economic development.
    JEL: D4 G30 J24 L25 M41 O1
    Date: 2021
  7. By: Emara, Noha; Zhang, Yuanhao
    Abstract: Due to the impact of COVID-19, it is important now more than ever to analyze the relationship between the improvement in digitization and the flow of remittances in order to fill the void that has come as a result of stay at home and quarantine orders. Using a comprehensive measure of digitization that encompasses the commonly used proxies of financial technology (Fintech) and employing a System Generalized Method of Moments (GMM) panel estimation methodology on annual data over the period 2004-2018, this paper examines the impact of digitization, as a proxy of Fintech, on the inflow of remittances for a sample of 34 developed and developing countries. Our analysis provides a case study on Brazil, Russia, India, China and South Africa (BRICS), known as five emerging markets with a great number of workers out of abroad and below the average level of digital transfers. Using the Digital Ecosystem Development Index developed by Katz and Calorda (2018), the results of the paper uncover a statistically significant nonlinear relationship between the improvement in digitization measures and the inflow of remittances with an exact threshold level. More specifically, our results for the full sample indicate that improvement in digitization may initially increase the remittances inflow leading to an increase in the stock of remittances received. Nevertheless, once the digitization index reaches its threshold level further improvement in digitization tends decrease as penetration increases, giving rise to a decline in the rate of remittances inflow. This result implies that the marginal effect of the digital penetration is larger when at its lower level, before the threshold level. For countries such as the BRICS, with a level of digitization below the average of our sample, policy makers should apply more aggressive and comprehensive policies to recoup the maximum gains of a digital ecosystem. Hence, our policy implications are directed towards increasing the investments in developing human capacity including carrying different skill development training programs to prepare individuals for the information age, expanding the internet coverage and speed especially in educational establishments, encouraging the use and access of electronic banking by consumers, producers, and governments, and taking cyber security and fraud protection more seriously to encourage the flow of remittances, especially in light of its renewed utility due to the recent pandemic.
    Keywords: Remittances; Digitization; FinTech; Financial Inclusion; BRICS
    JEL: C23 G21 O47
    Date: 2020–10–21

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