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  • December 2011
  • Article
  • Journal of Finance

Prices or Knowledge? What Drives Demand for Financial Services in Emerging Markets?

By: Shawn A. Cole, Thomas Sampson and Bilal Zia
  • Format:Print
  • | Pages:35
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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

Citation

Cole, Shawn A., Thomas Sampson, and Bilal Zia. "Prices or Knowledge? What Drives Demand for Financial Services in Emerging Markets?" Journal of Finance 66, no. 6 (December 2011): 1933–1967.

About The Author

Shawn A. Cole

Finance
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