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American Economic Review: Vol. 102 No. 6 (October 2012)

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Credit Market Consequences of Improved Personal Identification: Field Experimental Evidence from Malawi

Article Citation

Giné, Xavier, Jessica Goldberg, and Dean Yang. 2012. "Credit Market Consequences of Improved Personal Identification: Field Experimental Evidence from Malawi." American Economic Review, 102(6): 2923-54.

DOI: 10.1257/aer.102.6.2923

Abstract

We implemented a randomized field experiment in Malawi examining borrower responses to being fingerprinted when applying for loans. This intervention improved the lender's ability to implement dynamic repayment incentives, allowing it to withhold future loans from past defaulters while rewarding good borrowers with better loan terms. As predicted by a simple model, 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. We provide unique evidence that this improvement in repayment rates is accompanied by behaviors consistent with less adverse selection and lower moral hazard. (JEL D14, D82, G21, O12, O16)

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Authors

Giné, Xavier (World Bank and BREAD, Washington, DC)
Goldberg, Jessica (U MD)
Yang, Dean (U MI and BREAD, Ann Arbor, MI)

JEL Classifications

D14: Personal Finance
D82: Asymmetric and Private Information; Mechanism Design
G21: Banks; Depository Institutions; Micro Finance Institutions; Mortgages
O12: Microeconomic Analyses of Economic Development
O16: Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance


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