nep-fle New Economics Papers
on Financial Literacy and Education
Issue of 2023‒07‒10
eight papers chosen by

  1. Digital Financial Services regulations: Their evolution and impact on financial inclusion in East Africa By Ochen, Ronald; Bulime, Enock Will Nsubuga
  2. Assessment and analysis of financial literacy campaigns from financial institutions for Small- and Medium Size Enterprises (SME's) in Colombia By Rodríguez Pasmiño, Valentina; Berrones-Flemmig, Claudia Nelly
  3. Determinants of Fintech and Bigtech lending: the role of financial inclusion and financial development By Ozili, Peterson K
  4. Empowering Stability: Unveiling the Link between Financial Inclusion and Bank Resilience: A Comprehensive Review By Yeboah, Samuel
  5. Financial literacy, experimental preference measures and field behavior – A randomized educational intervention By Matthias Sutter; Michael Weyland; Anna Untertrifaller; Manuel Froitzheim; Sebastian O. Schneider
  6. Does the fintech ecosystem promote effective financial inclusion in Kenya? By Kodongo, Odongo
  7. Taxing Mobile Money in Kenya: Impact on Financial Inclusion By Diouf, Awa; Carreras, Marco; Santoro, Fabrizio
  8. Risk-based credit pricing in Kenya: The role of banks' internal factors By Tiriongo, Samuel; Josea, Kiplangat; Mulindi, Hillary

  1. By: Ochen, Ronald; Bulime, Enock Will Nsubuga
    Abstract: Digital Financial Services such as mobile money provides immeasurable benefits for financial inclusion and intermediation in East Africa. In this paper, we use a Fixed Effects panel model and annual data collected from 2007 to 2021 to examine the evolution of Digital Financial Services regulatory frameworks and their effects on conventional banking and Financial Inclusion in East African countries - Kenya, Tanzania, and Uganda. Results indicate that digital financial services regulations positively and significantly affect conventional banking services and mobile money (financial inclusion). Also, during the COVID19 pandemic period when the different governments instituted COVID19 policy response measures in the digital payments space to circumvent the use of cash and physical contact, positively affected digital financial services, thereby enhancing financial inclusion in the region. Also, an increase in lending rates and the consumer price index causes mobile money to decline. Therefore, digital financial services regulations are pivotal in advancing financial inclusion and intermediation through mobile money and conventional banking services in East Africa. Also, Central Banks should be concerned with mobile money in the economy because it forms part of the loanable funds by banks thus, stabilizing lending rates and prices in the economy is crucial for financial inclusion.
    Date: 2023
  2. By: Rodríguez Pasmiño, Valentina; Berrones-Flemmig, Claudia Nelly
    Abstract: The lack of financial literacy in SMEs is one of the main obstacles to SMEs finance (Zavatta, 2008). This problem is even greater in developing countries where the informal economy, the low levels of education and the low bancarization rates are known to be high in this region. One of the relevant trends in SME Finance are innovative financial instruments in "capacity building" mainly financial literacy campaigns (or financial education offerings) from financial institutions (Imanbaeva et al., 2017). The main research question of the present study is: Do financial literacy campaigns (or financial educational offerings) provide an adequate level of financial education for SMEs in Colombia? This research project was carried out applying a qualitative methodology. The primary data has been obtained through different types of 11 indepth interviews from the perspective of the financial institutions and also from Chambers of Commerce that provide the trainings. From the assessment and analysis of the financial literacy campaigns, the main results show that the programs that are designed for rural areas of the country do not have all the necessary components that the OECD recommends for a person to be considered financially educated. The financial education offerings carried out in the big cities (offered by the Banco de Bogota, the Chamber of Commerce of Bogota and Cali) provide SMEs with key mechanisms in financial education of great value, according with the components that the OECD recommends. Other important aspects from the results show that the financial education trainings are very short, so that it is not possible to cover all the required topics from the OECD to consider someone financial educated. Furthermore, several participants of the financial trainings are not able to finish due to her/his responsibilities as entrepreneur. Besides, for most of the offerings, there is not an impact evaluation (post-evaluation) about the effect of the trainings regarding the application of the knowledge in financial matters.
    Keywords: SME Finance, financial literacy campaigns, financial education, financial inclusion
    JEL: M O
    Date: 2023
  3. By: Ozili, Peterson K
    Abstract: Credit markets around the world are undergoing digital transformation which has led to the rise in Fintech and Bigtech lending. Fintech and Bigtech lending is the provision of credit by Fintech and Bigtech providers who have more capital, cutting-edge IT systems, worldwide recognition, greater online presence and are able to handle more big data on computers and mobile phones than traditional banks. Fintech and Bigtech lending is growing in importance, but the determinants of Fintech and Bigtech lending have received little attention in the literature. This study investigates the determinants of Fintech and Bigtech lending. The study focused on the effect of financial inclusion and financial development on Fintech and Bigtech lending. Using data for 18 countries from 2013 to 2019 and employing the difference-GMM and 2SLS regression methods, the findings reveal that financial inclusion and financial development are significant determinants of Fintech and Bigtech lending. Financial development is a positive determinant of Fintech and Bigtech lending while financial inclusion has a significant effect on Fintech and Bigtech lending. Also, Fintech and Bigtech lending lead to greater banking sector stability and also poses the risk of rising nonperforming loans. There is also a significant positive correlation between financial development and Fintech and Bigtech lending. These findings add to the emerging literature on the role of Fintech and Bigtech in financial intermediation. This research is significant because it provides insights into the role of financial inclusion and financial development in digital transformation of credit markets.
    Keywords: financial inclusion, financial development, Fintech, Bigtech, lending, ATM, bank branch, access to finance
    JEL: G21 G23
    Date: 2023–05–14
  4. By: Yeboah, Samuel
    Abstract: This systematic review examines the link between financial inclusion (FI) and bank stability (BS). FI, defined as access to and usage of formal financial services by individuals and businesses, has gained significant attention as a policy goal in many countries. BS, on the other hand, is a critical aspect of financial system resilience and plays a key role in promoting economic growth and stability. The review synthesizes the existing literature to understand the potential linkages, mechanisms, and empirical evidence regarding the link between FI and BS. The findings highlight the complex nature of this link, with both positive and negative implications for BS arising from increased FI. The review concludes with policy implications and directions for future research.
    Keywords: FI, BS, access to finance, formal financial services, financial system resilience, economic growth.
    JEL: G21 G28 O16
    Date: 2023–04–17
  5. By: Matthias Sutter (Max Planck Institute for Research on Collective Goods, Bonn); Michael Weyland (Ludwigsburg University of Education); Anna Untertrifaller (University of Cologne); Manuel Froitzheim (University of Siegen); Sebastian O. Schneider (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: We present the results of a randomized intervention to study how teaching financial literacy to 16-year old high-school students affects their behavior in risk and time preference tasks. Compared to two different control treatments, we find that teaching financial literacy makes subjects behave more patiently, more time-consistent, and more risk-averse. These effects persist for up to almost 5 years after our intervention. Behavior in the risk and time preference tasks is related to financial behavior outside the lab, in particular spending patterns. This shows that teaching financial literacy affects economic decision-making which in turn is important for field behavior.
    Keywords: Financial literacy, randomized intervention, risk preferences, time preferences, financial behavior, field experiment
    JEL: C93 D14 I21
    Date: 2023–04
  6. By: Kodongo, Odongo
    Abstract: We examine the effect of the fintech ecosystem on the consumption of formal financial services such as savings, credit and use of capital markets instruments in Kenya. We deploy Probit regression on data from FinAccess Survey for 2016 and 2021. Findings suggest that the fintech ecosystem facilitates credit evaluation and fosters credit use, offer financial products and services that better match users' needs hence fostering usage of those services, but does not mitigate the distance barrier. Second, the probability of an individual enjoying fintech ecosystem services falls by at least 19% if the individual resides in Northern Kenya. Third, the fintech ecosystem increases the probability of usage of traditional services of financial institutions by at least 5.2%. Fourth, the financial inclusion gains of the fintech ecosystem are not uniform across all user categories. We recommend several policy actions such as improved provisioning of physical infrastructure in remote areas, fiscal policy incentives, and affirmative action on financial inclusion.
    Date: 2023
  7. By: Diouf, Awa; Carreras, Marco; Santoro, Fabrizio
    Abstract: Many people argue that mobile money has the potential to increase financial inclusion and improve the livelihoods of poor people in Africa. However, while many African governments impose specific taxes on mobile money transactions, very little is known about their effect on the use of mobile money services. This study assesses the short- and long-term impact of the tax on money transfer fees that the Kenyan government introduced in 2013. The tax, more specifically an excise duty, was imposed on fees incurred in all money transactions, including mobile money. It was introduced at 10 per cent and increased to 12 per cent in 2018. Our analysis has two parts. We use country-level data to see if the tax affected the use of mobile money – transaction values and volume – and the number of active mobile money agents. In addition, we use four rounds of nationally representative survey data to estimate changes in the use of mobile money after introduction of the tax. We find that the excise duty did not have a significant impact on different aggregated indicators relating to the use of mobile money. However, survey data shows that the tax may have reduced the rate of increase in use of mobile money services affected by the changes in tax, such as sending and receiving money, compared to services that were not, like savings and paying bills. Importantly, while the amounts transacted may not change, users send and receive money within households less regularly. In addition, the tax seems to have a more detrimental impact on poorer households, which were less likely to be financially included before the tax was introduced. Larger households also show more negative effects after the tax.
    Keywords: Finance,
    Date: 2023
  8. By: Tiriongo, Samuel; Josea, Kiplangat; Mulindi, Hillary
    Abstract: Globally, credit scoring adoption has been on the rise on account of increased access to data, computing power, and the need for efficient credit allocation that is supportive of entrenching financial inclusion and economic growth. Relatedly, the adoption of risk-based pricing has gained traction, and, in this paper, we use annual bank level and macroeconomic data spanning the period 2003-2021, to estimate a panel model assessing the drivers of price of credit. Credit pricing in Kenya is affected by the bank size, credit risk, and efficiency among others. In particular, the larger the size of the bank, the lower the price of credit. Overall, the results reveals that the implementation of riskbased pricing will be heterogenous and dependent on bank-specific characteristics and internal policies, while the macroeconomic environment will have a negligible role on the credit prices determined by the banks.
    Date: 2023

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