Individuals and micro-entrepreneurs often lack su¢ cient …nancial literacy to make the complex …nancial decisions they face. We conduct a randomized control trial with a bank in the Dominican Republic to compare the impact of two distinct …nancial literacy programs. The …rst is a standard, fundamentals-based accounting training. The second is a simpli…ed, rule-of-thumb training that teaches basic heuristics to manage …nances. We …nd that only the latter produced signi…cant improvements in business practices and outcomes. The impact is especially pronounced for microentrepreneurs with poor …nancial literacy upfront. These results suggest a possible advantage to reducing the complexity of training programs.

We show that the cost of employee turnover in firms that rely on decentralized knowledge and personal relationships depends on the firms' planning horizon and the departing employees' incentives to transfer information. Using exogenous shocks to the relationship between borrowers and loan officers, we document that borrowers whose loan officers are on leave are less likely to receive new loans from the bank, are more likely to apply for credit from other banks, and are more likely to miss payments or go into default. These costs are smaller when turnover is expected as in the case of maternity leave, or when loan officers have incentives to transfer information, as in the case of voluntary resignations.

No abstract

No abstract

We investigate the implications of providing loan officers with a nonlinear compensation structure that rewards loan volume and penalizes poor performance. Using a unique data set provided by a large international commercial bank, we examine the main activities that loan officers perform: loan prospecting, screening, and monitoring. We find that when loan officers are at risk of losing their bonuses, they increase prospecting and monitoring. We further show that loan officers adjust their behavior more toward the end of the month when bonus payments are approaching. These effects are more pronounced for loan officers with longer tenures at the bank.