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Financial Literacy and Informal Loan

  • Danilo Braun Santos
  • Wesley Mendes-Da-Silva
  • Lauro Gonzalez
Chapter

Abstract

The finance literature documents associations between family financial literacy and their propensity to borrow. However, there is a predominance of studies that focus exclusively on formal loan markets. In this chapter, based on 2023 observations about financial behavior of families, we examined the impacts of financial literacy on borrowing in informal markets, such as loans obtained from friends or acquaintances or even moneylenders. Using multinomial logit models, we measured the effects of financial literacy on the propensity to take informal loans, comparing two groups: families that did not take any type of loan and those took bank loans. The proxy adopted for the level of financial literacy is the consumption of a particular financial product called capitalization bond. The results suggest that financial literacy may have greater relevance in the propensity for informal loans compared to the formal credit constraint.

Keywords

Financial literacy Informal loan Shadow economy Emerging economies 

JEL Code

H81 E26 I22 

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Copyright information

© Springer International Publishing AG, part of Springer Nature 2019

Authors and Affiliations

  • Danilo Braun Santos
    • 1
  • Wesley Mendes-Da-Silva
    • 2
    • 3
  • Lauro Gonzalez
    • 4
  1. 1.Federal University of Sao Paulo (UNIFESP)OsascoBrazil
  2. 2.Sao Paulo School of Business Administration (FGV/EAESP)Sao PauloBrazil
  3. 3.University of Texas at AustinAustinUSA
  4. 4.Columbia University and Fundação Getulio VargasSao PauloBrazil

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