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    Determinants and Impacts of Financial Literacy in the Lao PDR

    Morgan, Peter J.; Trinh, Long Q. | March 2019
    Abstract
    Financial literacy is gaining increasing importance as a policy objective in many countries. However, internationally comparable information on financial literacy is still scarce. The Organisation for Economic Cooperation and Development International Network on Financial Education (OECD/INFE) survey of adult financial literacy is a standardized survey instrument, but so far has mainly been implemented in higher-income countries outside of Asia. Our paper extends the literature by conducting the survey in a relatively low-income Asian economy—the Lao PDR—and analyzing the determinants of financial literacy and the effects of financial literacy on other behaviors. We also compare these results with those of our earlier study of financial literacy in Cambodia and Vietnam. This study of the Lao PDR extends our research in the Cambodia-Lao PDR-Myanmar-Viet Nam (CLMV) region, and the survey was broadened to include more variables that could be used as effective instrumental variables for financial literacy to deal with possible endogeneity problems. This increases our confidence in our findings that financial literacy positively affects both savings and financial inclusion. Generally, our study corroborates the findings of studies of other countries, but uncovers some differences as well. The average financial literacy score in the Lao PDR is found to be 12.5, slightly below that of Viet Nam (12.7) and higher than that of Cambodia (11.8). These scores are at the lower end of the range seen in a sample of 30 economies that have implemented the OECD/INFE survey, but they can be considered normal in view of the low levels of per capita income in these economies. The main determinants of financial literacy are found to be educational level, income, age, and occupational status. Both financial literacy and general education levels are found to be positively and significantly related to savings behavior and financial inclusion, and these results hold even when correcting for possible endogeneity of financial literacy.
    Citation
    Morgan, Peter J.; Trinh, Long Q.. 2019. Determinants and Impacts of Financial Literacy in the Lao PDR. © Asian Development Bank Institute. http://hdl.handle.net/11540/9765.
    Keywords
    Economic Development
    Economic Infrastructure
    Economic Policies
    Regional Economic Development
    Microfinance Programs
    Public Finance
    Local Financing
    Financial Stability
    Financial Sector Regulation
    Public Financial Management
    Financial System
    Financial Statistics
    Foreign and Domestic Financing
    Financial Inclusion
    Enterprises
    Financial aid
    Economies in transition
    Local Finance
    Local Government
    Insurance Companies
    Banks
    Social Equity
    Pension Funds
    Mutual Funds
    Financial Aspects
    Fiscal Policy
    Social responsibility of business
    Accounting
    Personal budgets
    Cost and standard of living
    Bank accounts
    Credit control
    Regulatory reform
    Banks and banking
    Digital Financial Service
    Pension plans
    Individual retirement accounts
    Employee pension trusts
    Investment management
    Investments
    Multiemployer pension plans
    Keogh plans
    Individual retirement accounts
    Pension plans
    Employee pension trusts
    Pension trusts
    Investment companies
    International banks and banking
    Stock exchanges
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    Citable URI
    http://hdl.handle.net/11540/9765
    Metadata
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    adbi-wp928.pdf (1.018Mb)
    Author
    Morgan, Peter J.
    Trinh, Long Q.
    Theme
    Economics
    Finance
     
    Copyright 2016-2021 Asian Development Bank Institute, except as explicitly marked otherwise
    Copyright 2016-2021 Asian Development Bank Institute, except as explicitly marked otherwise