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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