NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Credit Market Consequences of Improved Personal Identification: Field Experimental Evidence from Malawi

Xavier Giné, Jessica Goldberg, Dean Yang

NBER Working Paper No. 17449
Issued in September 2011
NBER Program(s):   LS

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).

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Document Object Identifier (DOI): 10.3386/w17449

Published: Xavier Gine & Jessica Goldberg & Dean Yang, 2012. "Credit Market Consequences of Improved Personal Identification: Field Experimental Evidence from Malawi," American Economic Review, American Economic Association, vol. 102(6), pages 2923-54, October. citation courtesy of

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