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American Economic Review Vol. 102 No. 6 2012

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

Xavier Giné1; Jessica Goldberg2; Dean Yang3

1 Development Economics Research Group, World Bank, and Bureau for Research and Economic Analysis of Development, 1818 H Street NW, Mail Stop MC 3–307, Washington, DC 20433. · 2 Department of Economics, University of Maryland, 3115G Tydings Hall, College Park, MD 20742. · 3 Ford School of Public Policy and Department of Economics, University of Michigan and Bureau for Research and Economic Analysis of Development, 3316 Weill Hall, 735 S. State Street, Ann Arbor, MI 48109, and National Bureau of Economic Research.

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.

DOI
10.1257/aer.102.6.2923
Volume
102
Issue
6
Pages
2923-2954
Language
en
Sources
bibtex:phds-export.bib crossref openalex

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