Choudhary, M. Ali and Jain, Anil K. (2022) Credit access and relational contracts: an experiment testing informational and contractual frictions for Pakistani farmers. International Finance Discussion Papers (1363). Board of Governors of the Federal Reserve System, Washington, DC.
Full text not available from this repository.Abstract
Credit access is limited in rural areas, especially in developing economies. Using a novel two-stage experimental design in Pakistan, first, we document that bank lending only serves a small fraction of rural credit demand. Second, we test the importance of information and enforcement technology frictions for limiting bank lending by randomly varying loan contractual terms across farmers and find that enforcement technology is the primary friction. Third, using an endline survey, we document that farmers tend to correctly identify the financial consequences of non-repayment. Fourth, our results suggest one possible solution to overcome this financial friction---a motivated and interlinked intermediary and the use of relational contracts.
| Item Type: | Monograph (Discussion Paper) |
|---|---|
| Divisions: | Centre for Economic Performance |
| Subjects: | H Social Sciences > HC Economic History and Conditions H Social Sciences > HG Finance |
| JEL classification: | C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C93 - Field Experiments G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O16 - Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance |
| Date Deposited: | 20 Jan 2025 13:06 |
| Last Modified: | 20 Jan 2025 13:06 |
| URI: | http://eprints.lse.ac.uk/id/eprint/126939 |
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