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

Bryan, Gharad and 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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Identification Number: 321

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
Subjects: H Social Sciences > HB Economic Theory
Sets: Departments > Economics
Collections > Economists Online
Date Deposited: 14 Feb 2012 10:20
Last Modified: 15 Jun 2017 11:25
URI: http://eprints.lse.ac.uk/id/eprint/41881

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