Identification strategy: a field experiment on dynamic incentives in rural credit markets
Xavier Gine (),
Jessica Goldberg and
Dean Yang ()
No 5438, Policy Research Working Paper Series from The World Bank
How do borrowers respond to improvements in a lender's ability to punish defaulters? This paper reports the results of a randomized field experiment in rural Malawi that examines the impact of fingerprinting borrowers in a context where a unique identification system is absent. Fingerprinting allows the lender to more effectively use dynamic repayment incentives: withholding future loans from past defaulters while rewarding good borrowers with better loan terms. Consistent with a simple model of borrower heterogeneity and information asymmetries, fingerprinting led to substantially higher repayment rates for borrowers with the highest ex ante default risk, but had no effect for the rest of the borrowers. The change in repayment rates is driven by reductions in adverse selection (smaller loan sizes) and lower moral hazard (for example, less diversion of loan-financed fertilizer from its intended use on the cash crop).
Keywords: Access to Finance; Debt Markets; Bankruptcy and Resolution of Financial Distress; Microfinance; Economic Theory&Research (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta, nep-dev, nep-exp and nep-mfd
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
http://www-wds.worldbank.org/external/default/WDSC ... ered/PDF/WPS5438.pdf (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:5438
Access Statistics for this paper
More papers in Policy Research Working Paper Series from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC.
Series data maintained by Roula I. Yazigi ().