Lower financial literacy induces use of informal loans
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...
| Authors: | , , |
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| Format: | article |
| Status: | Published version |
| Publication Date: | 2018 |
| Country: | Brasil |
| Institution: | Fundação Getulio Vargas (FGV) |
| Repository: | Revista de Administração de Empresas |
| Language: | Portuguese English |
| OAI Identifier: | oai:ojs.periodicos.fgv.br:article/73880 |
| Online Access: | https://periodicos.fgv.br/rae/article/view/73880 |
| Access Level: | Open access |
| Keyword: | Loan informal loan financial literacy capitalization bond behavioral finance Crédito crédito informal educación financiera títulos de capitalización finanzas comportamentales alfabetização financeira títulos de capitalização finanças comportamentais |
| Summary: | 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. |
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