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Changing Saving and Investment Behaviour: The Impact of Financial Literacy Training and Reminders on Micro-businesses

Author

Listed:
  • 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.

Suggested Citation

  • 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, vol. 27(5), pages 587-611.
    • Handle: RePEc:oup:jafrec:v:27:y:2018:i:5:p:587-611.
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    File URL: http://hdl.handle.net/10.1093/jae/ejy007
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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. Krawczyk, Michal, 2024. "Excessive discounting, longevity expectations, and retirement saving: An online survey," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 112(C).
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    7. Banerjee, Abhijit & Claudia, Martínez A. & Puentes, Esteban, 2025. "Better strategies for saving more: Evidence from three interventions in Chile," Journal of Development Economics, Elsevier, vol. 173(C).
    8. Tim Ölkers & Annkathrin Wahbi & Oliver Mußhoff, 2025. "Understanding Temptation Spending and Saving Behaviour Among Malian Farming Households," Journal of International Development, John Wiley & Sons, Ltd., vol. 37(3), pages 697-717, April.
    9. 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.
    10. 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.
    11. 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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    Keywords

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    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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