Microequity and Mutuality_experimental evidence on credit with performance contingent repayment

Francesco Cordaro, Marcel Fafchamps, Colin Mayer, Muhammad Meki, Simon Quinn and Kate Roll

No 2022-08, CSAE Working Paper Series from Centre for the Study of African Economies, University of Oxford

Abstract: We conduct the first field experiment of a performance-contingent microfinance contract. A large food multinational wishes to help micro-distributors in its supply chain with the financing of a productive asset. Working with the firm in Kenya, we compare asset financing under a traditional debt contract to three alternatives: (i) a novel equity-like financing contract, (ii) a hybrid debt-equity contract, and (iii) an index-insurance financing contract. Experimental results reveal large positive impacts from the contractual innovations. These findings demonstrate the economic a ppeal of microfinance contracts that leverage improved observability of performance to achieve a greater sharing of risk and reward.

Keywords: Microfinance; Microequity; Supply-chain finance (search for similar items in EconPapers)
JEL-codes: D14 G52 O12 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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https://www.csae.ox.ac.uk/publication/1261752/ora-hyrax

Related works:
Working Paper: Microequity and Mutuality: Experimental Evidence on Credit with Performance-Contingent Repayment (2024)
Working Paper: Microequity and Mutuality: Experimental Evidence on Credit with Performance-Contingent Repayment (2022)
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