Financial (Dis-)Information: Evidence from an Audit Study in Mexico
26 Pages Posted: 20 Apr 2016
Date Written: June 1, 2014
An audit study was conducted in peri-urban Mexico to understand the quality of information and products offered to low-income potential customers. Trained auditors visited multiple financial institutions seeking credit and savings products. Consistent with Gabaix and Laibson (2006), staff voluntarily provides little information about avoidable fees, especially to auditors trained to reveal little knowledge about the market. In addition, clients are almost never offered the cheapest product, most likely because staff is incentivized to offer more expensive products that are thus more profitable to the institution. This suggests that disclosure and transparency policies may be ineffective if they undermine the commercial interest of financial institutions.
Keywords: Financial Literacy, Access to Finance, Banks & Banking Reform, Insurance & Risk Mitigation, Emerging Markets
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