Citation

Discussion Paper Details

Please find the details for DP8857 in an easy to copy and paste format below:

Full Details

Title: You Can Pick Your Friends, But You Need to Watch Them: Loan Screening and Enforcement in a Referrals Field Experiment

Author(s): Gharad Bryan, Dean S. Karlan and Jonathan Zinman

Publication Date: February 2012

Keyword(s): credit market failures, Information asymmetries, peer networks, social capital and social networks

Programme Area(s): Development Economics

Abstract: We examine a randomized trial that allows separate identification of peer screening and enforcement of credit contracts. A South African microlender 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.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8857

Bibliographic Reference

Bryan, G, Karlan, D and Zinman, J. 2012. 'You Can Pick Your Friends, But You Need to Watch Them: Loan Screening and Enforcement in a Referrals Field Experiment'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8857