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Changing Saving and Investment Behaviour: 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. Knowledge gaps and behavioural biases such as limited attention have been discussed as potential constraints on saving. To test ways to alleviate such constraints, we offered a 4-hour financial literacy training and periodic SMS reminders for 3 months to a randomly selected group of micro-entrepreneurs in Addis Ababa, Ethiopia. We particularly compared the joint treatment to the two treatments in isolation for the first time in the literature. We find that SMS reminders increased savings relative to no treatment, and that the combination of reminders and financial training improved the financial literacy score and increased short-term deposits in the bank. Our results confirm earlier findings that savings can be limited by attention, and that financial literacy matters for saving behaviour when saving is at the top of the mind.

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  • Girum Abebe & Biruk Tekle & Yukichi Mano, 2018. "Changing Saving and Investment Behaviour: The Impact of Financial Literacy Training and Reminders on Micro-businesses," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 27(5), pages 587-611.
  • Handle: RePEc:oup:jafrec:v:27:y:2018:i:5:p:587-611.
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    2. 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.
    3. 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.

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    More about this item

    Keywords

    savings; reminders; financial training; entrepreneurs; Africa; experiment; inattention;
    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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