example Lowenstein, Sunstein and Golman, 2014). Indeed, the reason why consumers may remain misinformed and prone to making mistakes is because financial institutions shroud prices, even in competitive environments, in order to maximize profits (Ausubel, 1999; Gabaix and Laibson, 2006; Bordalo, Gennaioli and Shleifer, 2012; Heidhues, Koszegi and Murooka, 2013; Stango and Zinman, 2011). Firms will therefore adjust their behavior to undermine transparency initiatives (Duarte and Hastings, 2011) and may not actively market mandated products.

This discussion brings to the fore two interrelated questions that are the focus of this paper. First, what is the _quality of information_ provided by financial institutions to low-income prospective customers when choosing among financial products? Second, do financial institutions _offer the product that best meets the customer needs_ , in particular as it relates to cost and intended usage?

To answer these questions, we implemented an audit study in peri-urban areas near the capital of Peru, Mexico and Ghana and two provincial cities in Peru and Ghana.<sup>2</sup> These countries were chosen because they all have similar levels of financial inclusion but have regulations with different transparency requirements. According to the market conduct index published by the Economist Intelligence Unit’s 2014 Global Microscope Index and Report, Peru is ranked second, Mexico is ranked 25<sup>th</sup> (middle of the sample of countries) and Ghana is ranked 51<sup>st</sup> (second from the bottom).<sup>3</sup> In this study, auditors visited the branches of financial institutions seeking to acquire a loan or a savings product. Since the goal was to capture all the information given to the auditor until the product was contracted (or the auditor was rejected in the case of credit), several follow-up visits were required. Indeed, follow-up visits at the house of credit auditors were common and for this reason we recruited and trained local residents to serve as credit auditors instead of relying on professional auditors.<sup>4</sup> The scripts used by auditors differed along four dimensions. First, we introduced product specific variation. Savings auditors expressed a preference for either a transaction or an investment account where funds would be deposited for a minimum duration of one year. To study whether lenders issued credit responsibly, credit auditors requested a loan amount of either 20 percent or 70 percent of their household’s annual income, thus creating exogenous variation in the level of household indebtedness when requesting the loan. Second, to study whether the staff provided information to customers according to their perceived ability to absorb it, we varied the financial sophistication (experience) of the auditor made salient by the language used and the level of engagement during the visits. Third, to study the degree to which the staff

> 2 The two provincial cities in Peru, Puno and Piura and in Ghana are Kumasi and Takoradi.

> 3 Market conduct includes indicators of the capacity to protect the financial consumer, the content of disclosure rules, the disclosure of product terms, pricing information and non-discrimination in the financial service provision.

> 4 Audit studies have been used in other contexts to study hold-up in contracts (Iyer and Schoar, 2012), discrimination (Gneezy et al., 2012; Bertrand and Mullainathan, 2004), police performance (Banerjee et al.  2014) and quality of drugs (Bennett and Yin, 2014), among others.

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