Micro-entrepreneurs often lack the financial literacy required to
make important financial decisions. We conducted a randomized
evaluation with a bank in the Dominican Republic to compare the
impact of two distinct programs: standard accounting training
versus a simplified, rule-of-thumb training that taught basic financial
heuristics. The rule-of-thumb training significantly improved
firms' financial practices, objective reporting quality, and revenues.
For micro-entrepreneurs with lower skills or poor initial financial
practices, the impact of the rule-of-thumb training was significantly
larger than that of the standard accounting training, suggesting that
simplifying training programs might improve their effectiveness for
less sophisticated individuals.
"Keeping It Simple: Financial Literacy and Rules of Thumb."
American Economic Journal: Applied Economics,
Microeconomic Policy: Formulation; Implementation; Evaluation
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Contracting Out; Joint Ventures; Technology Licensing
Firm Performance: Size, Diversification, and Scope
Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance