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.
Drexler, Alejandro, Greg Fischer, and Antoinette Schoar.
"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