Impacts of Financial Literacy on the Loan Decisions of Financially Excluded Households in the People's Republic of China

44 Pages Posted: 11 Apr 2019

See all articles by Angela C. Lyons

Angela C. Lyons

University of Illinois at Urbana-Champaign

John Grable

University of Georgia - Department of Housing & Consumer Economics

Ting Zeng

Southwestern University of Finance and Economics (SWUFE) - Research Institute of Economics & Management

Date Written: February 20, 2019

Abstract

Financial literacy is a key tool being used to bring economically vulnerable populations into the financial mainstream. Data from the 2013 China Household Finance Survey (CHFS) were used to investigate the impacts of various dimensions of financial literacy on the use of bank and non-bank loans among rural, illiterate, and migrant populations in the People’s Republic of China. The findings show that the most vulnerable groups may be less likely to benefit from financial literacy, especially when it comes to usage of formal bank loans. Other factors such as those related to social networks and infrastructure may matter more than financial literacy. Results were found to vary across measures of financial literacy and financial inclusion. The findings suggest that barriers to access likely need to be overcome so that financial literacy can be more effective. The current study provides important insights for policy makers and international organizations designing national strategies to improve financial inclusion via financial literacy, especially for populations that have been traditionally excluded. Researchers are encouraged to reexamine previous definitions and measures of financial literacy and inclusion to develop a better understanding of the relationship between the two dimensions.

Keywords: financial literacy, financial inclusion, loan usage, financially vulnerable populations, People’s Republic of China

JEL Classification: D12, D14, G21, G23, G41, O17

Suggested Citation

Lyons, Angela C. and Grable, John and Zeng, Ting, Impacts of Financial Literacy on the Loan Decisions of Financially Excluded Households in the People's Republic of China (February 20, 2019). ADBI Working Paper 923. Available at SSRN: https://ssrn.com/abstract=3370021 or http://dx.doi.org/10.2139/ssrn.3370021

Angela C. Lyons (Contact Author)

University of Illinois at Urbana-Champaign ( email )

421 Mumford Hall, 1301 W Greogry Dr
Urbana, IL 61801
United States
217-244-2612 (Phone)
217-333-5538 (Fax)

John Grable

University of Georgia - Department of Housing & Consumer Economics ( email )

205 Dawson Hall
Athens, GA 30602-3622
United States

Ting Zeng

Southwestern University of Finance and Economics (SWUFE) - Research Institute of Economics & Management ( email )

55 Guanghuacun Street
Chengdu, Sichuan 610074
China

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