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http://ssrn.com/abstract=1133824
 
 

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Expanding Credit Access: Using Randomized Supply Decisions to Estimate the Impacts


Dean S. Karlan


Yale University; Innovations for Poverty Action; Massachusetts Institute of Technology (MIT) - Abdul Latif Jameel Poverty Action Lab; National Bureau of Economic Research (NBER)

Jonathan Zinman


Dartmouth College; Innovations for Poverty Action; Jameel Poverty Action Lab; National Bureau of Economic Research (NBER)

March 2007

CEPR Discussion Paper No. DP6407

Abstract:     
Expanding credit access is a key ingredient of development strategies worldwide. Microfinance practitioners, policymakers, and donors have ambitious goals for expanding access, and seek efficient methods for implementing and evaluating expansion. There is less consensus on the role of consumer credit in expansion initiatives. Some microfinance institutions are moving beyond entrepreneurial credit and offering consumer loans. But many practitioners and policymakers are skeptical about "unproductive" lending. These concerns are fuelled by academic work highlighting behavioural biases that may induce consumers to overborrow. We estimate the impacts of a consumer credit supply expansion using a field experiment and follow-up data collection. A South African lender relaxed its risk assessment criteria by encouraging its loan officers to approve randomly selected marginal rejected applications. We estimate the resulting impacts using new survey data on applicant households and administrative data on loan repayment, as well as public credit reports one and two years later. We find that the marginal loans produced significant benefits for borrowers across a wide range economic and well-being outcomes. We also find some evidence that the marginal loans were profitable for the Lender. The results suggest that consumer credit expansions can be welfare-improving.

Number of Pages in PDF File: 48

Keywords: Consumer credit, credit impact and microfinance

JEL Classification: D1, D9, J2, J6, O1

working papers series





Date posted: May 20, 2008  

Suggested Citation

Karlan, Dean S. and Zinman, Jonathan, Expanding Credit Access: Using Randomized Supply Decisions to Estimate the Impacts (March 2007). CEPR Discussion Paper No. DP6407. Available at SSRN: http://ssrn.com/abstract=1133824

Contact Information

Dean S. Karlan (Contact Author)
Yale University ( email )
Box 208269
New Haven, CT 06520-8269
United States
Innovations for Poverty Action ( email )
New Haven, CT
United States
Massachusetts Institute of Technology (MIT) - Abdul Latif Jameel Poverty Action Lab ( email )
E60-246
77 Massachusetts Avenue
Cambridge, MA 02139
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Jonathan Zinman
Dartmouth College ( email )
Hanover, NH 03755
United States
603-646-0075 (Phone)
HOME PAGE: http://www.dartmouth.edu/~jzinman/
Innovations for Poverty Action
New Haven, CT
United States
Jameel Poverty Action Lab
E60-246
77 Massachusetts Avenue
Cambridge, MA 02139
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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