You can pick your friends, but you need to watch them: Loan screening and enforcement in a referrals field experiment
You can pick your friends, but you need to watch them: Loan screening and enforcement in a referrals field experiment
7 July, 2020 •Similar Articles
Debt Relief or Debt Restructuring? Evidence from an Experiment with Distressed Credit Card Borrowers
This paper reports results from a randomized field experiment that offered distressed credit card borrowers more than $50 million in debt forgivene...
Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya
Does limited access to formal savings services impede business growth in poor countries? To shed light on this question, we randomized access to no...
Insurance Contracts when Individuals “Greatly Value” Certainty: Results from a Field Experiment in Burkina Faso
In discussing the paradoxical violation of expected utility theory that now bears his name, Maurice Allais noted that individuals tend to “greatl...
We examine a randomized trial that allows separate identification of peer screening and enforcement of credit contracts. A South African micro lender 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.