Savings Institutions - Savings Culture: The effect of culture and institutions on financial behaviors
Leung, Tara A.
- Submitted in partial fulfillment of the degree of Master of Arts in Law and Diplomacy at the Fletcher School of Law and Diplomacy. Abstract: How does culture influence how people manage money? In order to continue to provide better financial services for the poor, microfinance must recognize how the poor already manage their money and why they choose the strategies they do. To that end, this paper ... read moreexplores what role culture plays in determining financial behavior, and how a greater understanding of that role may help microfinance institutions (MFIs) provide better financial services to the rural poor. This paper is the result of financial diaries research in Rivas, Nicaragua, in 2009 as a consultancy project for international development agency Agros International . The study was designed to capture what financial services, both formal and informal, beneficiaries in their program sites used and why. Study data showed that respondents used many financial services, except for savings, a phenomenon that participants claimed was cultural. Subsequent research around culture and financial behavior revealed that culture can affect financial behaviors, but that its impacts are diluted and often indistinguishable from those of institutions and history. Since institutions are more flexible than culture or history, they should be the primary means by which MFIs and other non-governmental organizations (NGOs) encourage better financial management among the poor. The microfinance industry is urged to consider cultural factors in terms of individuals' beliefs about how to win in their, in order to gain a deeper understanding of a community's needs and the possible usefulness or harm of changing an institution or introducing a new microfinance product.read less