nep-fle New Economics Papers
on Financial Literacy and Education
Issue of 2022‒04‒25
two papers chosen by

  1. Ask a question, get an answer. A study of the framing effect on financial literacy in Italy By Paladino, Giovanna
  2. COVID-19, Fintech, and the Recovery of Micro, Small, and Medium-sized Enterprises: Evidence from Bangladesh By Hossain, Monzur; Chowdhury, Tahreen Tahrima

  1. By: Paladino, Giovanna
    Abstract: This paper takes its cue from the relevance of the framing effect related to behavioural biases associated with economic decision-making. Most attempts to measure financial literacy rely on surveys that include standardized questions about the knowledge of three or four fundamental concepts. A survey conducted in October 2021 that involved 2500 individuals representative of the Italian population made it possible to evaluate whether questions with different wording created higher respondent engagement, determined other answers and improved performance in terms of financial literacy. The descriptive and regression analysis showed that the wording mattered in three out of four questions. More engaging wording mitigated the gender effect by reducing the probability of women choosing the ‘I do not know’ option. However, while there was evidence of an increase in the percentage of correct answers in single questions, the overall level of financial literacy showed no signs of improvement. The regression analysis found that the likelihood of being financially literate, independently of the type of question, depends on sociodemographic variables (gender, age, geographical area and level of education) and on self-evaluation of digital and economic skills. In addition, knowledge of basic maths plays a key role. Whoever knows how to compute a percentage correctly has a notably higher probability of being financially literate. This evidence has clear policy indications.
    Keywords: financial literacy, framing, gender differences
    JEL: G02 G11 I22
    Date: 2022–03–02
  2. By: Hossain, Monzur (Asian Development Bank Institute); Chowdhury, Tahreen Tahrima (Asian Development Bank Institute)
    Abstract: We assess the impact of the COVID-19 pandemic on micro, small, and medium-sized enterprises (MSMEs) and the role of fintech, in particular, mobile financial services (MFS), in their recovery from COVID-induced losses. We use data from a survey of 216 MSMEs from Bangladesh Small and Cottage Industries Corporation industrial estates in Bangladesh during January to March 2021. Our results suggest that firms have been recovering gradually after the withdrawal from lockdown in June 2020. So far, 80% of production of the firms compared with pre-COVID levels had recovered by the end of December 2020. We use instrumental variable regression to assess the impact of the use of MFS on firms’ production, sales, and profit for three periods: lockdown (March–May 2020), limited lockdown (June–September 2020) and the reopening period (October–December 2020). We find significant and positive impact from the use of MFS on the production, sales, and profit of firms during this pandemic. The results indicate that the use of digital finance facilitates firms’ production through ensuring a stable supply of raw materials and sales that have prompted them to recover faster. However, the concern is that only about 31% of our sample firms use MFS for their businesses and an even lower proportion of firms are accustomed to using an online platform. Therefore, more incentives and supportive policies are needed to motivate MSMEs to use digital finance and online platforms to stay active in operations, particularly during the pandemic.
    Keywords: fintech; MSMEs; Bangladesh Small and Cottage Industries Corporation Estates; BSCIC; COVID-19; firm recovery; Bangladesh
    JEL: D20 D22 G10 G20
    Date: 2022–04–01

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