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Financial Literacy and Informal Loan

In: Individual Behaviors and Technologies for Financial Innovations

Author

Listed:
  • Danilo Braun Santos

    (Federal University of Sao Paulo (UNIFESP))

  • Wesley Mendes-Da-Silva

    (Sao Paulo School of Business Administration (FGV/EAESP)
    University of Texas at Austin)

  • Lauro Gonzalez

    (Columbia University and Fundação Getulio Vargas)

Abstract

The finance literature documents associations between family financial literacy and their propensity to borrow. However, there is a predominance of studies that focus exclusively on formal loan markets. In this chapter, based on 2023 observations about financial behavior of families, we examined the impacts of financial literacy on borrowing in informal markets, such as loans obtained from friends or acquaintances or even moneylenders. Using multinomial logit models, we measured the effects of financial literacy on the propensity to take informal loans, comparing two groups: families that did not take any type of loan and those took bank loans. The proxy adopted for the level of financial literacy is the consumption of a particular financial product called capitalization bond. The results suggest that financial literacy may have greater relevance in the propensity for informal loans compared to the formal credit constraint.

Suggested Citation

  • Danilo Braun Santos & Wesley Mendes-Da-Silva & Lauro Gonzalez, 2019. "Financial Literacy and Informal Loan," Springer Books, in: Wesley Mendes-Da-Silva (ed.), Individual Behaviors and Technologies for Financial Innovations, chapter 0, pages 143-165, Springer.
    • Handle: RePEc:spr:sprchp:978-3-319-91911-9_7
    DOI: 10.1007/978-3-319-91911-9_7
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