Debt Traps? Market Vendors and Moneylender Debt in India and the Philippines

Dean Karlan, Sendhil Mullainathan and Benjamin N. Roth ()

Working Papers from eSocialSciences

Abstract: A debt trap occurs when someone takes on a high-interest rate loan and is barely able to pay back the interest, and thus perpetually finds themselves in debt (often by re-financing). Studying such practices is important for understanding financial decision-making of households in dire circumstances, and also for setting appropriate consumer protection policies. A simple experiment is conducted in three sites in which they paid off high-interest moneylender debt of individuals. Most borrowers returned to debt within six weeks. One to two years after intervention, treatment individuals were borrowing at the same rate as control households

Keywords: eSS, debt; moneylender; household finance, debt trap, high-interest rate loan, interest, re-financing, financial decision aking, consumer protection policies, money lenders, borrowers, intervention, control household, Philippines, India. (search for similar items in EconPapers)
Date: 2018-10
Note: Institutional Papers
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Debt Traps? Market Vendors and Moneylender Debt in India and the Philippines (2019)
Working Paper: Debt Traps? Market Vendors and Moneylender Debt in India and the Philippines (2018)
Working Paper: Debt Traps? Market Vendors and Moneylender Debt in India and the Philippines (2018)
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