You can pick your friends, but you need to watch them: loan screening and enforcement in a referrals field experiment

Bryan, Gharad ORCID: 0009-0000-2449-930X, Karlan, Dean and Zinman, Jonathan (2012) You can pick your friends, but you need to watch them: loan screening and enforcement in a referrals field experiment. BREAD working paper (321). Bureau for Research and Economic Analysis of Development, Durham, NC, USA.

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Abstract

We examine a randomized trial that allows separate identification of peer screening and enforcement of credit contracts. A South African microlender offered half its clients a bonus for referring a friend who repaid a loan. For the remaining clients, the bonus was conditional on loan approval. After approval, the repayment incentive was removed from half the referrers in the first group and added for half those in the second. We find large enforcement effects, a $12 (100 Rand) incentive reduced default by 10 percentage points from a base of 20%. In contrast, we find no evidence of screening.

Item Type:	Monograph (Working Paper)
Official URL:	http://ipl.econ.duke.edu/bread/papers.htm
Additional Information:	© 2012 Bureau for Research and Economic Analysis of Development
Divisions:	Economics
Subjects:	H Social Sciences > HB Economic Theory
JEL classification:	C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C93 - Field Experiments D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis D - Microeconomics > D1 - Household Behavior and Family Economics > D14 - Personal Finance D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O12 - Microeconomic Analyses of Economic Development 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:	14 Feb 2012 10:20
Last Modified:	01 Nov 2024 04:54
URI:	http://eprints.lse.ac.uk/id/eprint/41881

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