Two Sides of the Same Rupee? Comparing Demand for Microcredit and Microsaving in a Framed Field Experiment in Rural Pakistan

30 Pages Posted: 17 Sep 2018

See all articles by Uzma Afzal

Uzma Afzal

University of Nottingham; Lahore School of Economics - Center for Research in Economics and Business

Giovanna D'Adda

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM)

Marcel Fafchamps

Stanford University - Freeman Spogli Institute for International Studies

Simon Quinn

University of Oxford

Farah Said

Centre for Research in Economics and Business, Lahore School of Economics

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Date Written: September 2018

Abstract

We use a field experiment to test whether saving and borrowing satisfy demand for lump‐sum accumulation from regular deposits. Inspired by ROSCAs, we offer different credit and saving contracts to subjects. We find that individuals often accept both credit and saving contract across experimental waves. This behaviour can be rationalised by assuming that individuals seek lump‐sum payments and struggle to hold savings. Structural estimation of this model accounts for the behaviour of 75% of participants. Of these, two‐thirds have high demand for lump‐sum accumulation but savings difficulties. These results imply that the distinction between microlending and microsaving is largely illusory.

Suggested Citation

Afzal, Uzma and D'Adda, Giovanna and Fafchamps, Marcel and Quinn, Simon R. and Said, Farah, Two Sides of the Same Rupee? Comparing Demand for Microcredit and Microsaving in a Framed Field Experiment in Rural Pakistan (September 2018). The Economic Journal, Vol. 128, Issue 614, pp. 2161-2190, 2018, Available at SSRN: https://ssrn.com/abstract=3246036 or http://dx.doi.org/10.1111/ecoj.12512

Uzma Afzal (Contact Author)

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

Lahore School of Economics - Center for Research in Economics and Business ( email )

Intersection Main Boulevard
Phase VI DHA and Burki Road
Burki, Lahore 54000
Pakistan

Giovanna D'Adda

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM) ( email )

Via Conservatorio, 7
Milan, 20122
Italy

Marcel Fafchamps

Stanford University - Freeman Spogli Institute for International Studies ( email )

Stanford, CA 94305
United States

Simon R. Quinn

University of Oxford ( email )

Farah Said

Centre for Research in Economics and Business, Lahore School of Economics ( email )

Intersection DHA VI and Burki
Burki
Lahore, Punjab 53200
Pakistan

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