Hitotsubashi Institute for Advanced Study


Changing Saving and Investment Behavior:
The Impact of Financial Literacy Training and Reminders on Micro-businesses


In developing countries, savings is an important financial tool, particu- larly 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

Report No.: HIAS-E-15
Author(s): Girum Abebe(a)
Biruk Tekle(a)
Yukichi Mano(b)
Affiliation: (a) Micro and Sectoral Research Center, Ethiopian Development Research Institute (EDRI)
(b) Graduate School of Economics, Hitotsubashi University
Issued Date: December 2015
Keywords: savings, reminders, financial training, entrepreneurs
JEL: D92, E21, L26