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

Listed author(s):
  • ABEBE, Girum
  • TEKLE, Biruk
  • MANO, Yukichi

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 may be because of a knowledge gap and behavioral biases. We employed an experimental approach relaxing these savings constraints to explore the effects of providing financial literacy training and reminders to micro-entrepreneurs in Ethiopia. While financial literacy training alone seemed ineffective, the reminders significantly increased the savings-to-sales ratio by 54.5%, the percentage of business proceeds reinvested back to business by 91.0 %, and the percentage of savings goal achieved by 116%. Joint treatment significantly increased the percentage of savings goal achieved by 66.5% and deposit in an ordinary bank account by 84%. Our results confirm earlier findings that savings can be limited by attention, whereas how entrepreneurs manage savings depends on their levels of financial literacy [151 words].

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File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/27615/1/070_hiasDP-E-15.pdf
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Paper provided by Hitotsubashi Institute for Advanced Study, Hitotsubashi University in its series Discussion paper series with number HIAS-E-15.

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Length: 49 p.
Date of creation: 08 Dec 2015
Handle: RePEc:hit:hiasdp:hias-e-15
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