Financial Literacy and Informal Loan

  • Danilo Braun Santos
  • Wesley Mendes-Da-Silva
  • Lauro Gonzalez


The finance literature documents associations between family financial literacy and their propensity to borrow. However, there is a predominance of studies that focus exclusively on formal loan markets. In this chapter, based on 2023 observations about financial behavior of families, we examined the impacts of financial literacy on borrowing in informal markets, such as loans obtained from friends or acquaintances or even moneylenders. Using multinomial logit models, we measured the effects of financial literacy on the propensity to take informal loans, comparing two groups: families that did not take any type of loan and those took bank loans. The proxy adopted for the level of financial literacy is the consumption of a particular financial product called capitalization bond. The results suggest that financial literacy may have greater relevance in the propensity for informal loans compared to the formal credit constraint.


Financial literacy Informal loan Shadow economy Emerging economies 

JEL Code

H81 E26 I22 


  1. Allais, M. (1952). The foundations of a positive theory of choice involving risk and a criticism of the postulates and axioms of the American school. Dordrecht: Springer.Google Scholar
  2. Angst, D., & de Abreu, J. A. P. (2007). Capitalization bonds-effects of anticipated recoveries in profitability and loyalty of customer at a bank in Paraná. Revista da FAE, 10(2), 99–113.Google Scholar
  3. Atkinson, A., & Messy, F. A. (2012). Measuring financial literacy. Paris: OECD Publishing.Google Scholar
  4. Banco Central do Brasil (2011). Relatório de inclusão financeira – Number 2. Access: 7 July 2014.
  5. Banco Central do Brasil (2016). palestra proferida na Organização das Cooperativas Brasileiras,disponível em
  6. Behrman, J., Mitchell, O. S., Soo, C., & Bravo, D. (2010). Financial literacy, schooling, and wealth accumulation (NBER Working Paper No. 16452).Google Scholar
  7. Bernheim, D., & Garrett, D. M. (2001). The effects of financial education in the workplace: Evidence from a survey of households. Journal of Public Economics, 87(7–8), 1487–1519.Google Scholar
  8. Bertrand, M., & Morse, A. (2011). Information disclosure, cognitive biases, and payday borrowing. Journal of Finance, 66(6), 1865–1893.CrossRefGoogle Scholar
  9. Borlea, S. N., Achim, M. V., & Miron, M. G. A. (2017). Corruption, shadow economy and economic growth: An empirical survey across the european union countries. Studia Universitatis “Vasile Goldis” Arad–Economics Series, 27(2), 19–32.CrossRefGoogle Scholar
  10. Calvet, L. E., Campbell, J. Y., & Sodini, P. (2007). Down or out: Assessing the welfare costs of household investment mistakes. Journal of Political Economy, 115(5), 707–747.CrossRefGoogle Scholar
  11. Calvet, L. E., Campbell, J. Y., & Sodini, P. (2009). Measuring the financial sophistication of households. American Economic Review, 99(2), 393–398.CrossRefGoogle Scholar
  12. Campbell, J. Y. (2006). Household finance. Journal of Finance, 61(4), 1553–1604.CrossRefGoogle Scholar
  13. Carlin, B. I., & Robinson, D. T. (2012). What does financial literacy training teach us? The Journal of Economic Education, 43(3), 235–247.CrossRefGoogle Scholar
  14. Carpena, F., Cole, S. A., Shapiro, J., & Zia, B. H. (2015). The Abcs of Financial Education: Experimental evidence on attitudes, behaviour, and cognitive biases (Policy Research working paper no. 7413; Impact Evaluation series). Retrieved from World Bank Group website:
  15. Cole, S., Sampson, T., & Zia, B. (2011). Prices or knowledge? what drives demand for financial services in emerging markets? Journal of Finance, 66(6), 1933–1967.CrossRefGoogle Scholar
  16. Cull, R., & Scott, K. (2010). Measuring household usage of financial services: Does it matter how or whom you ask? World Bank Economic Review, 24, 199–233.CrossRefGoogle Scholar
  17. Demirgüç-Kunt, A., & Klapper, L. F. (2012). Measuring financial inclusion: The global findex database. World Bank Policy Research Working Paper (6025).CrossRefGoogle Scholar
  18. FenaCap (2013). Capitalização: O que você precisa saber. Accessed 06 Nov 2015.
  19. FenaCap (2015a). A capitalização na agenda econômica e social brasileira. Accessed 13 Dec 2015.
  20. FenaCap (2015b). Título de capitalização: O que você precisa saber. Accessed 13 Dec 2015.
  21. Fonseca, R., Mullen, K. J., Zamarro, G., & Zissimopoulos, J. (2012). What explains the gender gap in financial literacy? the role of household decision making. Journal of Consumer Affairs, 46(1), 90–106.CrossRefGoogle Scholar
  22. Gabaix, X., & Laibson, D. (2006). Shrouded attributes, consumer myopia, and information suppression in competitive markets. Quarterly Journal of Economics, 121, 505–540.CrossRefGoogle Scholar
  23. Garcia, F. G., & Villa Lhacer, P. M. (2012). Maximização de valor pelas cooperativas de crédito brasileiras. Revista Pensamento & Realidade, 27(1), 62–76.Google Scholar
  24. Genesove, D., & Mayer, C. (2001). Loss aversion and seller behavior: Evidence from the housing market. Quarterly Journal of Economics, 116(4), 1233–1260.CrossRefGoogle Scholar
  25. Goetzmann, W. N., & Kumar, A. (2008). Equity portfolio diversification. Review of Finance, 12, 433–463.CrossRefGoogle Scholar
  26. Grinblatt, M., & Keloharju, M. (2001). How distance, language, and culture influence stockholdings and trades. Journal of Finance, 56(3), 1053–1073.CrossRefGoogle Scholar
  27. Grinblatt, M., Keloharju, M., & Linnainmaa, J. (2011). IQ and stock market participation. Journal of Finance, 66(6), 2121–2164.CrossRefGoogle Scholar
  28. Grinblatt, M., Keloharju, M., & Linnainmaa, J. (2012). IQ, trading behavior, and performance. Journal of Financial Economics, 104(2), 339–362.CrossRefGoogle Scholar
  29. Hoff, K., & Stiglitz, J. E. (1998). Moneylenders and bankers: Price-increasing subsidies in a monopolistically competitive market. Journal of Development Economics, 55(2), 485–518.CrossRefGoogle Scholar
  30. Hung, A., Parker, A. M., & Yoong, J. (2009). Defining and measuring financial literacy (Working paper WR-708, RAND corporation).Google Scholar
  31. Klapper, L., Lusardi, A., & Panos, G. A. (2013). Financial literacy and its consequences: Evidence from Russia during the financial crisis. Journal of Banking & Finance, 37(10), 3904–3923.CrossRefGoogle Scholar
  32. La Porta, R., Lopez-de Silanes, F., & Schleifer, A. (1999). Corporate ownership around the world. Journal of Finance, 54(2), 471–517.CrossRefGoogle Scholar
  33. Lhacer, P. M. (2012). Cooperativas de Credito e Formação de Taxas de Juros nas Operações Bancárias: Tese e evidências empíricas para o Brasil. Doctoral thesis, Fundação GetúlioVargas, Escola de Administração de Empresas de São Paulo, São Paulo.Google Scholar
  34. Lopes, L. L. (2013). Goals and the organization of choice under risk (Working Paper). Available at:
  35. Lopes, L. L., & Oden, G. C. (1999). The role of aspiration level in risky choice: A comparison of cumulative prospect theory and SP/A theory. Journal of Mathematical Psychology, 43(2), 286–313.CrossRefGoogle Scholar
  36. Lusardi, A. (2008). Financial literacy: An essential tool for informed consumer choice? Technical report, NBER.Google Scholar
  37. Lusardi, A., & Mitchell, O. S. (2008). Planning and financial literacy: How do women fare? Technical report, NBER.Google Scholar
  38. Lusardi, A., & Mitchell, O. S. (2009). How ordinary consumers make complex economic decisions: Financial literacy and retirement readiness. Technical report, National Bureau of Economic Research.Google Scholar
  39. Lusardi, A., & Mitchell, O. S. (2011a). Financial literacy and retirement planning in the United States. Journal of Pension Economics and Finance, 10(4), 509–525.CrossRefGoogle Scholar
  40. Lusardi, A., & Mitchell, O. S. (2011b). Financial literacy around the world: An overview. Journal of Pension Economics and Finance, 10(04), 497–508.CrossRefGoogle Scholar
  41. Lusardi, A., & Mitchell, O. S. (2014). The economic importance of financial literacy: Theory and evidence. Journal of Economic Literature, 52(1), 5–44.CrossRefGoogle Scholar
  42. Lusardi, A., & Tufano, P. (2009). Debt literacy, financial experiences, and overindebtedness. Technical report, NBER.Google Scholar
  43. Madestam, A. (2014). Informal finance: A theory of money lenders. Journal of Development Economics, 107, 157–174.CrossRefGoogle Scholar
  44. Melo, E. F. L., Franklin, S. L., Jr., & Neves, C. R. (2012). Mensuração do risco de sorteio em títulos de capitalização. Brazilian Review of Finance, 10(2), 197–213.Google Scholar
  45. Modigliani, F., & Brumberg, R. (1954). Utility analysis and the consumption function: An interpretation of cross-section data. In The collected papers of Franco Modigliani (Vol. 6, pp. 3–46). London: MIT Press.Google Scholar
  46. Neumann, L. J., & Morgenstern, O. (1947). Theory of games and economic behavior. Princeton: Princeton University Press.Google Scholar
  47. Nicolosi, G., Peng, L., & Zhu, N. (2009). Do individual investors learn from their trading experience? Journal of Financial Markets, 12(2), 317–336.CrossRefGoogle Scholar
  48. OECD (2013). Organisation for economic co-operation and development financial literacy and inclusion: Results of oecd/infe survey across countries and by gender.
  49. Pagano, M. (2001). Defusing default: Incentives and institutions. Washington, DC: Johns Hopkins University Press.Google Scholar
  50. Portocarrero, H. (2008). Títulos de capitalização e poupança financeira. Revista Conjuntura Econômica, 62(5), 64–67.Google Scholar
  51. Rose, L. (2008). Financial literacy: Who cares? New Zeland Management, 55(5), 66.Google Scholar
  52. Schiavini, J. M., Scherer, F. L., & Coronel, D. A. (2012). Understanding guanxi and its influence on international relations. Revista de Economia Contemporânea, 16(2), 316–332.CrossRefGoogle Scholar
  53. Schneider, F., Buehn, A., & Montenegro, C. E. (2010). New estimates for the shadow economies all over the world. International Economic Journal, 24(4), 443–461.CrossRefGoogle Scholar
  54. Seru, A., Shumway, T., & Stoffman, N. (2009). Learning by trading. Review of Financial Studies, 23(2), 705–739.CrossRefGoogle Scholar
  55. Sheng, H. H., & Mendes-Da-Silva, W. (2014). The big family: Informal financing of small-and medium-sized businesses by guanxi. Thunderbird Int’l Business Review, 56(2), 157–171.CrossRefGoogle Scholar
  56. Stolper, O. A., & Walter, A. (2017). Financial literacy, financial advice, and financial behavior. Journal of Business Economics, 87(5), 581–643.CrossRefGoogle Scholar
  57. SUSEP (2015). Superintendência de seguros privados. Accessed 06 January 2015.
  58. Thaler, R. H., & Tucker, W. (2013). Smarter information, smarter consumers. Harvard Business Review, 91, 44–56.Google Scholar
  59. Tosi, P. G., Faleiros, R. N., & Teodoro, R. S. (2007). Crédito e pequena cafeicultura no oeste paulista: Franca/sp 1890–1914. Revista Brasileira de Economia, 61(3), 405–426.CrossRefGoogle Scholar
  60. Tosi, P. G., Faleiros, R. N., & Fontanari, R. (2011). Modalidades e hierarquias do crédito na cafeicultura paulista (1889–1930). Revista Brasileira de Economia, 65(4), 401–412.Google Scholar
  61. Turvey, C. G., Kong, R., & Huo, X. (2010). Borrowing amongst friends: The economics of informal credit in rural China. China Agricultural Economic Review, 2(2), 133–147.CrossRefGoogle Scholar
  62. Van Rooij, M., Lusardi, A., & Alessie, R. (2011). Financial literacy and stock market participation. Journal of Financial Economics, 101, 449–472.CrossRefGoogle Scholar
  63. Willis, L. E. (2008). Against financial literacy education. Iowa Law Review, 94, 08–10.Google Scholar
  64. Yuan, Y., & Gao, P. (2012). Farmers’ financial choices and informal credit markets in China. China Agricultural Economic Review, 4(2), 216–232.CrossRefGoogle Scholar

Copyright information

© Springer International Publishing AG, part of Springer Nature 2019

Authors and Affiliations

  • Danilo Braun Santos
    • 1
  • Wesley Mendes-Da-Silva
    • 2
    • 3
  • Lauro Gonzalez
    • 4
  1. 1.Federal University of Sao Paulo (UNIFESP)OsascoBrazil
  2. 2.Sao Paulo School of Business Administration (FGV/EAESP)Sao PauloBrazil
  3. 3.University of Texas at AustinAustinUSA
  4. 4.Columbia University and Fundação Getulio VargasSao PauloBrazil

Personalised recommendations