Financial Literacy and Financial Behaviour: Experimental Evidence from Rural Rwanda

Abstract

We organise a field experiment with smallholder farmers in Rwanda to measure the impact of financial literacy training on financial knowledge and behaviour. The training increased financial literacy of participants, changed their savings and borrowing behaviour and had a positive effect on the new business start-up. However, it failed to have a significant (short-term) impact on income. Using a two-stage regression framework, we identify enhanced financial literacy as one of the important factors explaining behavioural changes. We also test whether financial knowledge spillovers from trained farmers to their peers in local village banks but find no evidence for that.

Factors shaping the financial capability of low‐income consumers from rural regions of Poland

“…Special attention should be given to low-income consumers, especially from rural regions (Murendo & Mutsonziwa, 2017). According to most studies, this group of consumers is the most disadvantaged in terms of their level of financial literacy (Betti, Dourmashkin, Rossi, & Yin, 2007;Guiso et al, 2001;Lusardi & Mitchell, 2007;Lusardi & Tufano, 2009;Sayinzoga, Bulte, & Lensink, 2016) as well as their lack of financial inclusion (Johnson & Sherraden, 2007;Lyons, Chang, & Scherpf, 2006;Sherraden & Grinstein-Weiss, 2015). Low-income may have a great impact on increased financial stress and on self-regulatory conditions, which in turn may limit or even destroy self-control (Bernheim, Ray, & Yeltekin, 2013;Camepnhaut, 2015;Mullainathan & Shafir, 2013;Xiao, Sorhaindo, & Garman, 2006).…”

Does Financial Education Impact Financial Literacy and Financial Behavior, and If So, When?

“…This kind of behavior also stretches across other areas, including portfolio composition (Campbell 2006;Bucher-Koenen and Ziegelmeyer 2014;von Gaudecker 2015), excessive and overly expensive borrowing (Stango and Zinman 2009;Gathergood 2012;Agarwal and Mazumder 2013;Gerardi et al 2013;Zinman 2015), as well as participation in financial markets in general (van Rooij et al 2011). Related problems arise in developing countries, often with even more serious consequences as people are exposed to heavy shocks without having sufficient insurance or mitigation instruments (e.g., Sayinzoga et al 2016). All this strongly motivates providing financial education to foster financial behavior.…”

Financial literacy and savings decisions by adult financial consumers in Zimbabwe

“…Furthermore, financial literacy trainings and interventions have been proposed to complement interventions that promote financial inclusion especially in developing countries. Recently, researchers have started to examine financial literacy and its implications on household financial decisions such as savings, borrowing, investing and debt behaviour (Lusardi and Mitchell, 2007;Cole et al, 2011;van Rooij et al, 2011a,b;Sevim et al, 2012;Jappelli and Padula, 2013;Landerretche and Martinez, 2013;Karlan et al, 2014;Sayinzoga et al, 2016;Gaudecker, 2015). For example, Jappelli and Padula (2013) using data from European countries predict that financial literacy and wealth are strongly correlated.…”