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

71 Pages Posted: 23 Sep 2011 Last revised: 6 Mar 2023

See all articles by Xavier Giné

Xavier Giné

World Bank - Development Research Group (DECRG)

Jessica Goldberg

University of Maryland, Department of Economics

Dean Yang

University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy; National Bureau of Economic Research (NBER); University of Michigan at Ann Arbor - Department of Economics

Date Written: September 2011

Abstract

We report the results of a randomized field experiment that examines the credit market impacts of improvements in a lender's ability to determine borrowers' identities. Improved personal identification enhances the credibility of a lender's dynamic repayment incentives by allowing it to withhold future loans from past defaulters and expand credit for good borrowers. The experimental context, rural Malawi, is characterized by an imperfect identification system. Consistent with a simple model of borrower heterogeneity and information asymmetries, 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. The change in repayment rates is driven by reductions in adverse selection (smaller loan sizes) and lower moral hazard (for example, less diversion of loan-financed fertilizer from its intended use on the cash crop).

Suggested Citation

Gine, Xavier and Goldberg, Jessica and Yang, Dean and Yang, Dean, Credit Market Consequences of Improved Personal Identification: Field Experimental Evidence from Malawi (September 2011). NBER Working Paper No. w17449, Available at SSRN: https://ssrn.com/abstract=1932579

Xavier Gine (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

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HOME PAGE: https://sites.google.com/site/decrgxaviergine/

Jessica Goldberg

University of Maryland, Department of Economics ( email )

College Park, MD 20742
United States

Dean Yang

University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy ( email )

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Ann Arbor, MI 48109
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734-764-6158 (Phone)

HOME PAGE: http://www.umich.edu/~deanyang/

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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University of Michigan at Ann Arbor - Department of Economics

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Ann Arbor, MI 48109-1220
United States

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