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

  • Xavier Gine
  • Jessica Goldberg
  • Dean Yang

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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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.6.2923
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 102 (2012)
Issue (Month): 6 (October)
Pages: 2923-54

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Handle: RePEc:aea:aecrev:v:102:y:2012:i:6:p:2923-54
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  1. Jonathan Conning & Christopher Udry, 2005. "Rural Financial Markets in Developing Countries," Working Papers 914, Economic Growth Center, Yale University.
  2. A Jorge Padilla & Marco Pagano, 1994. "Sharing Default Information as a Borrower Discipline Device," CEPR Financial Markets Paper 0043, European Science Foundation Network in Financial Markets, c/o C.E.P.R, 77 Bastwick Street, London EC1V 3PZ..
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  4. Juan M. Sanchez, 2009. "The role of information in the rise in consumer bankruptcies," Working Paper 09-04, Federal Reserve Bank of Richmond.
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  9. Pierre-André Chiappori & Bernard Salanié, 1997. "Testing for Asymmetric Information in Insurance Markets," Working Papers 97-11, Centre de Recherche en Economie et Statistique.
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  13. Macho-Stadler, Ines & Perez-Castrillo, J. David, 2001. "An Introduction to the Economics of Information: Incentives and Contracts," OUP Catalogue, Oxford University Press, edition 2, number 9780199243259, March.
  14. de Janvry, Alain & McIntosh, Craig & Sadoulet, Elisabeth, 2010. "The supply- and demand-side impacts of credit market information," Journal of Development Economics, Elsevier, vol. 93(2), pages 173-188, November.
  15. Dean Karlan & Jonathan Zinman, 2004. "Observing unobservables: Identifying information asymmetries with a consumer credit field experiment," Natural Field Experiments 00283, The Field Experiments Website.
  16. Abhijit V. Banerjee & Andrew F. Newman, 1990. "Occupational Choice and the Process of Development," Discussion Papers 911, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  17. Mathias Dewatripont & Lars Peter Hansen & Stephen Turnovsky, 2003. "Advances in economics and econometrics: the eighth world congress," ULB Institutional Repository 2013/9557, ULB -- Universite Libre de Bruxelles.
  18. Marcel Fafchamps, 2004. "Market Institutions in Sub-Saharan Africa: Theory and Evidence," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262062364, June.
  19. Dan Bernhardt & Huw Lloyd-Ellis, 1993. "Enterprise, Inequality and Economic Development," Working Papers 893, Queen's University, Department of Economics.
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  23. repec:fth:wobaco:1083 is not listed on IDEAS
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