Can Better Forms of Personal Identification Improve the Functioning of Credit Markets?

Date:

From a new working paper by Xavier Giné, Jessica Goldberg, and Dean Yang:

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).

I had seen Xavi present this paper at Namur when I was on sabbatical there in 2009-2010. Back then, the paper had a different title (“Identification Strategy: A Field Experiment on Dynamic Incentives in Rural Credit Markets,”) which I am surprised they abandoned given the “identification strategy” play on words.

(Visited 19 times, 1 visits today)

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Share post:

Featured Video

click to play

Popular

More like this
Related

Malawian Man Nabbed After He Was Caught Wearing A T-Shirt He Stole From A House He Broke Into Last Year

Ndirande resident, 18-year-old Francis Chimwaza, broke into a house...

Zimbabwean Man Catches His Wife With Boyfriend Bonking At A Lodge [Watch]

Ladies these days are going out of their matrimonial...

See The Woman Who Slept With 40 Men on Her 40th Birthday (Watch Video)

A yet-to-be-identified lady has revealed that she slept with...

Court awaits witchdoctor’s findings to rule on divorce case

ZAMBIA - THE LUSAKA Boma Local Court is waiting...