nep-fle New Economics Papers
on Financial Literacy and Education
Issue of 2021‒07‒19
five papers chosen by

  1. Financial inclusion-exclusion paradox: how banked adults become unbanked again By Ozili, Peterson Kitakogelu
  2. Financial education for youth: A randomized evaluation in Uruguay By Borraz, Fernando; Caro, Ana; Caño-Guiral, Maira; Roa, María José
  3. Medium, Small and Medium Enterprises and Digital Platforms By imkotta, Distin Findly
  4. Nexus of Financial Inclusion and Economic Growth: Benchmarking the Performance of Indian States By Yadava, Anup Kumar; Singh, Bhanu Pratap; Yadav, Vishal
  5. The Effects of Usury Ceilings on Consumers Welfare: Evidence from the Microcredit Market in Colombia By Laura Marcela Capera Romero

  1. By: Ozili, Peterson Kitakogelu
    Abstract: This paper analyses how financially included adults might become unbanked again. Agents of financial inclusion incorporate economic and social constraints in the delivery of formal financial services. These constraints limit the ability of poor banked adults to use basic financial services to the fullest. The constraints affect agents of financial inclusion positively, and affect customers negatively up to a point where the marginal benefit of being financially included is negative for poor customers. When the marginal benefit of using formal financial services becomes negative, the affected banked adults may discontinue using their formal accounts or exit the formal financial sector when they can no longer bear the negative effect of social and economic constraints that hinder their ability to enjoy basic financial services to the fullest.
    Keywords: Financial inclusion, financial institutions, financial exclusion, banked adults, formal accounts, paradox, access to finance, households, constraints.
    JEL: G00 G02 G18 G21 H24 O12 O17
    Date: 2021–06
  2. By: Borraz, Fernando; Caro, Ana; Caño-Guiral, Maira; Roa, María José
    Abstract: Using data from a randomized control trial in Uruguay, we evaluate the impact of an economic and financial education program targeted to senior high-school students. The program is based on an innovative playful approach workshop about monetary policy and financial supervision. We find that the workshop has a positive and significant impact on student knowledge. Our results shed light on the importance of economic and financial education for the youth in developing countries.
    Keywords: BCUEduca,economic education,youth,treatment effects
    JEL: A21 D12 I22 J24
    Date: 2021
  3. By: imkotta, Distin Findly
    Abstract: A new business platform is a must for companies that are disrupting new media technology, especially during the Covid 19 era. However, many incumbent companies are less able to keep up with changing business trends. Anticipate all changes in the competitive sclimate in the digital era in carrying out the company transformation program along with the implementation of good corporate governance values to avoid oral hazards and a greater risk of failure. The qualitative method used in this research is a case study approach. The analysis focuses on efforts to raise Medium, Small and Medium Enterprises (MSMEs) that contribute to improving the Indonesian economy. The findings show that credit, training, and mentoring programs have not been able to strengthen their position in small and medium enterprises but they are still working to increase the literacy index and financial inclusion to accelerate income distribution in Indonesia.
    Date: 2021–06–06
  4. By: Yadava, Anup Kumar; Singh, Bhanu Pratap; Yadav, Vishal
    Abstract: The study evaluates and benchmarks the performance of Indian states considering the proposed multidimensional financial inclusion index (FII) as input and economic growth as an output variable. The HDI methodology of UNDP is adopted in the construction of supply and demand side FII for 27 Indian states for the period 2004 to 2017. The output-oriented DEA models are used in which supply and demand FIIs are used as an input and real gross state domestic product as an output to measure the technical efficiency of the states. The major findings of the study suggest Maharashtra performs at the frontier and benchmarks for all other states in both CRS and VRS DEA models which is consistent with FII indices of the states. Therefore, structural reforms are warranted in the policy framework to improve financial services in poor and low performing states to spur economic development.
    Keywords: Financial inclusion; Multidimensional Index; Data Envelopment Analysis, Benchmarking, Economic Growth
    JEL: G0 O10 O40
    Date: 2021
  5. By: Laura Marcela Capera Romero (Tilburg University)
    Abstract: Interest rate caps, also called usury ceilings, are a widely used policy tool to protect consumers from excessive charges by loan providers. However, they are often cited as a barrier for the advancement of financial inclusion, as they may reduce the incentives to provide loans to lower-income borrowers and and to invest in branching networks, particularly in remote and isolated locations. In this paper, I exploit a change in the usury ceiling applied to micro-loans in Colombia to understand the effects of this policy across geographic markets. To quantify the welfare implications of this policy, I structurally estimate a demand and supply model that incorporates the changes in size and composition of the potential market caused by this policy change, in a context where the distribution of branching networks has a crucial role in the optimal pricing strategies of loan providers. I find that the policy generated an increase in consumer surplus at the national level that is explained by greater credit availability for riskier borrowers and the expansion of branching networks in areas that were previously under-served. A counterfactual exercise reveals that the welfare gains associated to this policy depend greatly on additional investment in branching networks, as the opening of new branches in some locations is needed to compensate the consumer welfare loss associated with the subsequent increase in interest rates after the relaxation of the ceiling.
    Keywords: Microfinance institutions, price ceilings, consumer welfare
    JEL: L11 D43 D61 G21 G28
    Date: 2021–06–28

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NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.