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Article
| Journal of Finance
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December 2011
Prices or Knowledge? What Drives Demand for Financial Services in Emerging Markets?
by
Shawn A. Cole, Thomas Sampson and Bilal Zia
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Abstract
Financial development is critical for growth, but its micro-determinants are not well understood. We test leading theories of low demand for financial services in emerging markets, combining novel survey evidence from Indonesia and India with a field experiment. We find a strong correlation between financial literacy and behavior. However, a financial education program has modest effects, increasing demand for bank accounts only for those with low levels of education or financial literacy. In contrast, small subsidies greatly increase demand. A follow-up survey confirms these findings, demonstrating that the newly opened accounts remain open and in use two years after the intervention.
Keywords: Price;
Knowledge;
Demand and Consumers;
Emerging Markets;
Banks and Banking;
Education;
Finance;
Behavior;
Service Operations;
Financial Services Industry;
India;
Indonesia;