nep-mfd New Economics Papers
on Microfinance
Issue of 2011‒05‒14
three papers chosen by
Olivier Dagnelie
Instituto de Analisis Economico, CSIC

  1. Remembering to Pay? Reminders vs. Financial Incentives for Loan Payments By Ximena Cadena; Antoinette Schoar
  2. Micro-loans, Insecticide-Treated Bednets and Malaria:Evidence from a Randomized Controlled Trial in Orissa (India) By Alessandro Tarozzi; Aprajit Mahajan; Brian Blackburn; Dan Kopf; Joanne Yoong; Lakshmi Krishnan
  3. Student loans: Liquidity constraint and higher education in South Africa By Marc Gurgand; Adrien Lorenceau; Thomas Mélonio

  1. By: Ximena Cadena; Antoinette Schoar
    Abstract: We report the results from a field experiment with a micro lender in Uganda to test the effectiveness of privately implemented incentives for loan repayment. Using a randomized control trial we measure the impact of three different treatments: Borrowers are either given a lump sum cash reward upon completion of the loan (equivalent to a 25% interest rate reduction on the current loan), a 25% reduction of the interest rate in the next loan the borrower takes from the bank, or a monthly text message reminder before the loan payment is due (SMS). We find that on average the size of the treatment effect is similar across all the treatment groups: borrowers in the treatment groups have a 7-9% increase in the probability of paying on time and the average days late drop by 2 days a month. The results suggest that simple text messages which help borrowers to better manage their repayment dates have similar effects as large changes in the cost of capital of 25% of interest. The impact of the cash back incentives are stronger for customers with smaller loans and less banking experience, the reduced future interest rate seemed to be most effective for customers with larger loans, while the SMS text messages were particularly effective for younger customers.
    JEL: G21 O16
    Date: 2011–05
  2. By: Alessandro Tarozzi; Aprajit Mahajan; Brian Blackburn; Dan Kopf; Joanne Yoong; Lakshmi Krishnan
    Abstract: Many severe health risks in developing countries could be substantially reduced with access to appropriate preventive measures. However, the associated costs are often high enough to restrict access among poor households, and free provision through public health campaigns is often not financially feasible. Findings are described from the first large-scale cluster randomized controlled trial in a developing country context that evaluates the uptake of a health-protecting technology, insecticide-treated bednets (ITNs), through micro-consumer loans, as compared to free distribution and control conditions. [BREAD Working Paper No. 297]. URL:[ rs/working/297.pdf].
    Keywords: malaria, developing country, insecticide-treated bednets, ITNs, health technology, micro consumer loans, poor households, public health, Orissa, India, randomized controlled trial
    Date: 2011
  3. By: Marc Gurgand (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique, J-PAL Europe - J-PAL Europe, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA); Adrien Lorenceau (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Thomas Mélonio (AFD - Agence Française de Développement - Agence Française de Développement)
    Abstract: Empirical evidence that access to higher education is constrained by credit availability is limited and usually indirect. This paper provides direct evidence by comparing university enrollment rates of South African potential students, depending on whether they get a loan or not to cover their registration fees, in a context where such fees are high. We use matched individual data from both a credit institution (Eduloan) and the Department of Education. Based on a regression discontinuity design using the fact that loans are granted according to a credit score threshold, we can estimate the causal impact of loan obtainment. We find that the credit constraint is substantial, as it decreases the enrollment rate into higher education by more than 20 percentage points in a population of student loan applicants.
    Keywords: Education ; university ; credit constraint ; regression discontinuity
    Date: 2011–05

This nep-mfd issue is ©2011 by Olivier Dagnelie. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.