Lower financial literacy induces use of informal loans

Main Article Content

Danilo Braun Santos
Wesley Mendes-da-Silva
Lauro Gonzalez

Abstract

Finance literature documents associations between a family’s financial literacy and its propensity to borrow. However, most studies focus exclusively on formal loan markets. Based on 2,023 observations about finan­cial behavior of Brazilian families, we examined the impacts of financial literacy on informal borrowing, such as loans from friends or moneylenders. Using multinomial logit models, we compared financial lite­racy’s effects on the propensity to take informal loans between families that did not borrow at all and those who took bank loans. Financial literacy is measured by the investment in capitalization bonds, a financial instrument in the Brazilian market. The results suggest that financial literacy’s relevance to informal loans may exceed that for formal credit channels.

Downloads

Download data is not yet available.

Metrics

Metrics Loading ...

Article Details

How to Cite
SANTOS, D. B.; MENDES-DA-SILVA, W.; GONZALEZ, L. Lower financial literacy induces use of informal loans. RAE - Revista de Administracao de Empresas , [S. l.], v. 58, n. 1, p. 44–59, 2018. DOI: 10.1590/S0034-759020180104. Disponível em: https://periodicos.fgv.br/rae/article/view/73880. Acesso em: 12 jun. 2024.
Section
Articles

References

Allais, M. (1952). The foundations of a positive theory of choice involving risk and a criticism of the postulates and axioms of the American School. In M. Allais, & O. Hagen (Eds.), Expected utility hypotheses and the Allais paradox (pp. 27-145). Dordrecht, Netherlands: Springer.

Angst, D., & Abreu, J. A. P. de. (2007). Títulos de capitalização: Efeitos dos resgates antecipados na rentabilização e fidelização de clientes em um banco no Paraná. Revista da FAE, 10(2), 99-113.

Atkinson, A., & Messy, F. A. (2012). Measuring financial literacy: Results of the OECD/International Network on Financial Education (INFE) pilot study [Working Papers on Finance, Insurance and Private Pensions nº 15]. OECD. Paris, France.

Banco Central do Brasil. (2011). Relatório de inclusão financeira. Recuperado de https://www.bcb.gov.br/Nor/relincfin/RIF2011.pdf

Banco Central do Brasil. (2016). Palestra proferida no II Fórum de Cidadania Financeira. Brasília, Brasil. Recuperado de https://youtu.be/0w1i2DlgRXQ

Behrman, J., Mitchell, O. S., Soo, C., & Bravo, D. (2010). Financial literacy, schooling, and wealth accumulation [Working Paper nº 16452]. National Bureau of Economic Research. Cambridge, USA.

Bernheim, D., & Garrett, D. M. (2001). The effects of financial education in the workplace: Evidence from a survey of households. Journal of Public Economics, 87(7-8), 1487-1519. doi:10.1016/S0047-2727(01)00184-0

Bertrand, M., & Morse, A. (2011). Information disclosure, cognitive biases, and payday borrowing. The Journal of Finance, 66(6), 1865- 1893. doi:10.1111/j.1540-6261.2011.01698.x

Campbell, J. Y. (2006). Household finance. The Journal of Finance, 61(4), 1553-1604. doi:10.1111/j.1540-6261.2006.00883.x

Carlin, B. I., & Robinson, D. T. (2012). What does financial literacy training teach us? The Journal of Economic Education, 43(3), 235-247. doi:10.1080/00220485.2012.686385

Cole, S., Sampson, T., & Zia, B. (2011). Prices or knowledge? What drives demand for financial services in emerging markets? The Journal of Finance, 66(6), 1933-1967. doi:10.1111/j.1540-6261.2011.01696.x

Cull, R., & Scott, K. (2010). Measuring household usage of financial services: Does it matter how or whom you ask? The World Bank Economic Review, 24(2), 199-233.

Demirgüç-Kunt, A., & Klapper, L. F. (2012). Measuring financial inclusion: The global findex database [Working Paper no 6025]. World Bank Policy Research. Washington, USA.

Federação Nacional de Capitalização. (2013). Capitalização: O que você precisa saber. Recuperado de http://www.cnseg.org.br/fenacap/publicacoes/

Federação Nacional de Capitalização. (2015a). A capitalização na agenda econômica e social brasileira. Recuperado de http://www.cnseg.org.br/fenacap/publicacoes/

Federação Nacional de Capitalização. (2015b). Título de capitalização: O que você precisa saber. Recuperado de http://www.cnseg.org.br/fenacap/publicacoes/

Fonseca, R., Mullen, K. J., Zamarro, G., & Zissimopoulos, J. (2012). What explains the gender gap in financial literacy? The role of household decision making. Journal of Consumer Affairs, 46(1), 90-106. doi:10.1111/j.1745-6606.2011.01221.x

Gabaix, X., & Laibson, D. (2006). Shrouded attributes, consumer myopia, and information suppression in competitive markets. The Quarterly Journal of Economics, 121(2), 505-540. doi:10.1162/qjec.2006.121.2.505

Garcia, F. G., & Lhacer, P. M. V. (2012). Maximização de valor pelas cooperativas de crédito brasileiras. Revista Pensamento & Realidade, 27(1), 62-76.

Hoff, K., & Stiglitz, J. E. (1997). Moneylenders and bankers: Priceincreasing subsidies in a monopolistically competitive market. Journal of Development Economics, 55(2), 429-462. doi:10.1016/ S0304-3878(96)00443-9

Hung, A., Parker, A. M., & Yoong, J. (2009). Defining and measuring financial literacy [Working Paper no WR-708]. RAND Corporation. Recuperado de https://ssrn.com/abstract=1498674

Klapper, L., Lusardi, A., & Panos, G. A. (2013). Financial literacy and its consequences: Evidence from Russia during the financial crisis. Journal of Banking & Finance, 37(10), 3904-3923. doi:10.1016/j. jbankfin.2013.07.014 L

hacer, P. M. (2012). Cooperativas de crédito e formação de taxas de juros nas operações bancárias: Tese e evidências empíricas para o Brasil (Tese de doutorado, Fundação Getulio Vargas, Escola de Administração de Empresas de São Paulo).

LaPorta, R. La, Lopez-de-Silanes, F., & Schleifer, A. (1999). Corporate ownership around the world. Journal of Finance, 54(2), 471-517. doi:10.1111/0022-1082.00115

Lopes, L. (2016). Goals and the organization of choice under risk in both the long run and the short run: Hidden factors in the meltdown. In A. G. Malliaris, L. Shaw, & H. Shefrin, The global financial crisis and its aftermath: Hidden factors in the meltdown (pp. 226-239). Oxford, UK: Oxford University Press. doi:10.1093/ acprof:oso/9780199386222.003.0009

Lopes, L. L., & Oden, G. C. (1999). The role of aspiration level in risky choice: A comparison of cumulative prospect theory and SP/A Theory. Journal of Mathematical Psychology, 43(2), 286-313. doi:10.1006/jmps.1999.1259

Lusardi, A. (2008). Financial literacy: An essential tool for informed consumer choice? [Working Paper nº 14084]. National Bureau of Economic Research. Cambridge, USA.

Lusardi, A., & Mitchell, O. S. (2008). Planning and financial literacy: How do women fare? [Working Paper nº 13750]. National Bureau of Economic Research. Cambridge, USA.

Lusardi, A., & Mitchell, O. S. (2009). How ordinary consumers make complex economic decisions: Financial literacy and retirement readiness [Working Paper nº 15350]. National Bureau of Economic Research.Cambridge, USA.

Lusardi, A., & Mitchell, O. S. (2011a). Financial literacy and retirement planning in the United States. Journal of Pension Economics and Finance, 10(4), 509-525. doi:10.1017/S147474721100045X

Lusardi, A., & Mitchell, O.S. (2011b). Financial literacy around the world: an overview. Journal of Pension Economics and Finance, 10(04), 497- 508. doi:10.1017/S1474747211000448

Lusardi, A., & Mitchell, O.S. (2014). The economic importance of financial literacy: Theory and evidence. Journal of Economic Literature, 52(1), 5-44. doi:10.1257/jel.52.1.5

Lusardi, A., & Tufano, P. (2009). Debt literacy, financial experiences, and overindebtedness [Working Paper nº 14808]. National Bureau of Economic Research.Cambridge, USA.

Madestam, A. (2014). Informal finance: A theory of money lenders. Journal of Development Economics, 107, 157-174.

Melo, E. F. L., Franklin, S. L., Jr., & Neves, C. R. (2012). Mensuração do risco de sorteio em títulos de capitalização. Brazilian Review of Finance, 10(2), 197-213.

Modigliani, F., & Brumberg, R. (1954). Utility analysis and the consumption function: An interpretation of cross-section data. In F. Modigliani (Ed.), The collected papers of Franco Modigliani (Vol. 6, pp. 3-46). London, UK: MIT Press.

Neumann, L. J., & Morgenstern, O. (1947). Theory of games and economic behavior. New Jersey, USA: Princeton University Press Princeton.

Organisation for Economic Co-operation and Development (2013). Financial literacy and inclusion: Results of OECD/INFE survey across countries and by gender. Recuperado de http://www.oecd.org/daf/fin/financialeducation/

Pagano, M. (2001). Defusing default: Incentives and institutions. Washington, USA: John Hopkins University Press.

Portocarrero, H. (2008). Títulos de capitalização e poupança financeira. Revista Conjuntura Econômica, 62(5), 64-67.

Rose, L. (2008). Financial literacy: Who cares? New Zeland Management, 55(5). Recuperado de https://management.co.nz/

Schiavini, J. M., Scherer, F. L., & Coronel, D. A. (2012). Entendendo o guanxi e sua influência nas relações internacionais. Revista de Economia Contemporânea, 16(2), 316-332. doi:10.1590/S1415- 98482012000200007

Schneider, F., Buehn, A., & Montenegro, C. E. (2010). New estimates for the shadow economies all over the world. International Economic Journal, 24(4), 443-461. doi:10.1080/10168737.2010.525974

Sheng, H. H., & Mendes-Da-Silva, W. (2014). The big family: Informal financing of small-and medium-sized businesses by guanxi. Thunderbird International Business Review, 56(2), 157-171. doi:10.1002/tie.21609

Superintendência de Seguros Privados (2015). 4º relatório de análise e acompanhamento dos mercados supervisionados. Recuperado de http://www.susep.gov.br/

Thaler, R. H., & Tucker, W. (2013). Smarter information, smarter consumers. Harvard Business Review. Recuperado de https://hbr.org/

Tosi, P. G., Faleiros, R. N., & Fontanari, R. (2011). Modalidades e hierarquias do crédito na cafeicultura paulista (1889-1930). Revista Brasileira de Economia, 65(4), 401-412. doi:10.1590/S0034- 71402011000400005

Tosi, P. G., Faleiros, R. N., & Teodoro, R. S. (2007). Crédito e pequena cafeicultura no oeste paulista: Franca/SP 1890-1914. Revista Brasileira de Economia, 61(3), 405-426. doi:10.1590/S0034-71402007000300006

Turvey, C. G., Kong, R., & Huo, X. (2010). Borrowing amongst friends: The economics of informal credit in rural China. China Agricultural Economic Review, 2(2), 133-147. doi:10.1108/17561371011044261

Van Rooij, M., Lusardi, A., & Alessie, R. (2011). Financial literacy and stock market participation. Journal of Financial Economics, 101(2), 449-472. doi:10.1016/j.jfineco.2011.03.006

Willis, L. E. (2008). Against financial literacy education. Iowa Law Review, 94, 8-10.

Yuan, Y., & Gao, P. (2012). Farmers’ financial choices and informal credit markets in China. China Agricultural Economic Review, 4(2), 216-232. doi:10.1108/17561371211224791