Financial (Dis-)Information: Evidence from a Multi-Country Audit Study

42 Pages Posted: 19 Jul 2016 Last revised: 27 Apr 2018

See all articles by Xavier Giné

Xavier Giné

World Bank - Development Research Group (DECRG)

Rafael Keenan Mazer

World Bank

Date Written: July 19, 2016

Abstract

An audit study was conducted in Ghana, Mexico and Peru to understand the quality of financial information and products offered to low-income customers. Trained auditors visited multiple financial institutions, seeking credit and savings products. Consistent with Gabaix and Laibson (2006), staff only provides information about the cost when asked, disclosing less than a third of the total cost voluntarily. In fact, the cost disclosed voluntarily is uncorrelated with the expensiveness of the product. In addition, clients are rarely offered the cheapest product, most likely because staff is incentivized to offer more expensive and thus more profitable products to the institution. This suggests that clients are not provided enough information to be able to compare among products, and that disclosure and transparency policies may be ineffective because they undermine the commercial interest of financial institutions.

Keywords: Legal Institutions of the Market Economy, Banks & Banking Reform, Rural Microfinance and SMEs, Microfinance, Financial Sector Policy, Financial Literacy

Suggested Citation

Gine, Xavier and Mazer, Rafael Keenan, Financial (Dis-)Information: Evidence from a Multi-Country Audit Study (July 19, 2016). World Bank Policy Research Working Paper No. 7750, Available at SSRN: https://ssrn.com/abstract=2811735

Xavier Gine (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

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HOME PAGE: https://sites.google.com/site/decrgxaviergine/

Rafael Keenan Mazer

World Bank

1818 H Street, NW
Washington, DC 20433
United States

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