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Changing saving and investment behavior: the impact of financial literacy training and reminders on micro-businesses

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  • Girum Abebe
  • Biruk Tekle
  • Yukichi Mano

Abstract

In developing countries, savings is an important financial tool, particularly for micro-business with limited access to credit. However, micro-entrepreneurs often undersave, even when they have some surplus and the desire to save maybe because of knowledge gap and behavioral biases. To test the importance of these saving constraints, we offered four-hour financial literacy training and periodic SMS reminders for three months to randomly selected group of micro-entrepreneurs in Addis Ababa, Ethiopia.. While financial literacy training alone seemed ineffective, we find that reminders and joint treatment encouraged better saving behavior. Our results confirm earlier findings that savings can be limited by attention, whereas how entrepreneurs manage savings depends on their levels of financial literacy.

Suggested Citation

  • Girum Abebe & Biruk Tekle & Yukichi Mano, 2016. "Changing saving and investment behavior: the impact of financial literacy training and reminders on micro-businesses," CSAE Working Paper Series 2016-08, Centre for the Study of African Economies, University of Oxford.
    • Handle: RePEc:csa:wpaper:2016-08
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    Cited by:

    1. Karlan, Dean & Horn, Samantha & Jamison, Julian C. & Zinman, Jonathan, 2020. "Does lasting behavior change require knowledge change? Evidence from savings interventions for young adults," CEPR Discussion Papers 15392, C.E.P.R. Discussion Papers.
    2. Cátia Batista & Marcel Fafchamps & Pedro C. Vicente, 2018. "Keep It Simple: A Field Experiment on Information Sharing in Social Networks," NBER Working Papers 24908, National Bureau of Economic Research, Inc.
    3. Cátia Batista & Marcel Fafchamps & Pedro C Vicente, 2022. "Keep It Simple: A Field Experiment on Information Sharing among Strangers [Changing Saving and Investment Behavior: The Impact of Financial Literacy Training and Reminders on Micro-Businesses]," The World Bank Economic Review, World Bank, vol. 36(4), pages 857-888.
    4. Augustine Kwadwo Yeboah, 2019. "Drivers of Savings Account Ownership Status: A Cross-Sectional Analysis from Ghana," Journal of Social and Development Sciences, AMH International, vol. 10(1), pages 51-60.
    5. Antonio Molina-García & Julio Diéguez-Soto & M. Teresa Galache-Laza & Marta Campos-Valenzuela, 2023. "Financial literacy in SMEs: a bibliometric analysis and a systematic literature review of an emerging research field," Review of Managerial Science, Springer, vol. 17(3), pages 787-826, April.
    6. Suzuki, Aya & Mano, Yukichi & Abebe, Girum, 2018. "Earnings, savings, and job satisfaction in a labor-intensive export sector: Evidence from the cut flower industry in Ethiopia," World Development, Elsevier, vol. 110(C), pages 176-191.
    7. Eun Jin Ryu & Aya Suzuki, 2021. "ROSCAS as Insurance: Comparing Formal and Informal Methods of Saving among the Unskilled Workers in the Ethiopian Cut‐Flower Industry," The Developing Economies, Institute of Developing Economies, vol. 59(3), pages 243-274, September.
    8. Abhijit Banerjee & Claudia Martínez A & Esteban Puentes, 2023. "Better Strategies for Saving More Evidence from Three Interventions in Chile," Working Papers wp545, University of Chile, Department of Economics.
    9. Putra Hilmi Prayitno & Sheerad Sahid & Muhammad Hussin, 2022. "Social Capital and Household Economic Welfare: Do Entrepreneurship, Financial and Digital Literacy Matter?," Sustainability, MDPI, vol. 14(24), pages 1-16, December.

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    More about this item

    Keywords

    savings; reminders; financial training; entrepreneurs;
    All these keywords.

    JEL classification:

    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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