uninformative; Section 4 then discusses our methodology for combining experimental with nonexperimental methods and the resulting estimates of treatment impact; and Section 5 concludes.

# **2. The Intervention, Samples, and Take-up**

# **2.1 Context**

Mexico has experienced a remarkable increase in the penetration of financial services in the population in recent years. For instance, the number of credit cards owned was estimated at 27.5 million in December of 2016 – a number 12.4 percent higher than that registered at the end of 2015.<sup>2</sup> In a country with 76 million adults, this implies that there is one credit card for every three adults.<sup>3</sup> As of June 2016, the balance in credit card debts represented 39.4 percent of the total credit to personal consumption issued in the country.<sup>4</sup> This rapid growth in credit card usage in Mexico may clash with the amount of time that people have had to learn what an appropriate use of the cards may be. In Mexico, only 32 percent of adults were found to be financially literate, positioning it around the 85<sup>th</sup> place in a worldwide survey of 142 countries (Klapper et al. 2015). Equally worrying, Ponce et al. (2017) illustrate how Mexican cardholders with more than one card typically leave money on the table by using the higher rate card, and experience 31 percent higher cost than the minimum to finance their existing debt.

The experiment of our study was rolled out in several cities across Mexico by BBVA Bancomer, our partner bank. BBVA Bancomer has a dominant position in the credit card market in Mexico. In 2016, BBVA Bancomer and Citigroup Banamex held more than half the credit card market in Mexico and around the same share of the total balance in such credits.<sup>5</sup> Clients of our partner bank appear to be good candidates for improvement in their financial literacy skills. More than half are classified as either medium or high risk, and practically one in five is considered by BBVA Bancomer to be high-risk. BBVA Bancomer credit card clients also appear to use their cards regularly and heavily: they spend on their credit cards about 6,600 Mexican pesos (MXP) per month, which is not far from the 7,365 MXP monthly salary in 2014.<sup>6</sup>

# **2.2 The Interventions**

In this paper, we tackle the question of how effective is financial literacy in improving financial behavior through two distinct treatments. One treatment arm is based on providing the typical approach to financial training: a classroom setting. Since this is the most common tool used by private and public institutions alike to promote financial education, understanding the potential effects and benefits remains an important question. The second treatment arm is based on personalized coaching sessions. This arm responds to the concern in Willis (2011) that due to the heterogeneity of households’ circumstances and needs, effective financial education needs to be

> 2 <u>https://www.publimetro.com.mx/mx/economia/2017/05/03/numero-tarjetas-credito-se-dispara-12-4-condusef.html</u>

> 3 Based on INEGI’s population Count 2015 and including those 20 years and older.

> 4 <u>http://www.banxico.org.mx/sistema-financiero/publicaciones/reporte-de-tasas-de-interes-efectivas-de-tarjetas/%7B3A787547-BAAA-A0F2-4D1A-151E96D32321%7D.pdf</u>

> 5 Based on comparable market of credit cards (Banxico, 2016).

> 6 Informe Anual del Observatorio de Salarios 2016 “Los salarios y la desigualdad en México” IBERO/EQUIDE

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