Referrals: Peer Screening and Enforcement in a Consumer Credit Field Experiment

Gharad T. Bryan, Dean Karlan, Jonathan Zinman

NBER Working Paper No. 17883
Issued in March 2012, Revised in May 2013
NBER Program(s):Corporate Finance, Law and Economics, Labor Studies

Empirical evidence on peer intermediation lags behind many years of lending practice and a large body of theory in which lenders use peers to mitigate adverse selection and moral hazard. Using a simple referral incentive mechanism under individual liability, we develop and implement a two-stage field experiment that permits separate identification of peer screening and enforcement effects. We allow for borrower heterogeneity in both ex-ante repayment type and ex-post susceptibility to social pressure. Our key contribution is how we deal with the interaction between these two sources of asymmetric information. Our method allows us to cleanly identify selection on the likelihood of repayment, selection on the susceptibility to social pressure, and loan enforcement. We estimate peer effects on loan repayment in our setting, and find no evidence of screening (albeit with an imprecisely estimated zero) and large effects on enforcement. We then discuss the potential utility and portability of the methodological innovation, for both science and for practice.

download in pdf format
   (670 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w17883

Published: Gharad Bryan & Dean Karlan & Jonathan Zinman, 2015. "Referrals: Peer Screening and Enforcement in a Consumer Credit Field Experiment," American Economic Journal: Microeconomics, vol 7(3), pages 174-204. citation courtesy of

Users who downloaded this paper also downloaded* these:
Karlan, Morten, and Zinman w17952 A Personal Touch: Text Messaging for Loan Repayment
Weisbrod and Whalley w17544 The Contribution of Chinese FDI to Africa's Pre Crisis Growth Surge
Henderson and Kuncoro w12110 "Sick of Local Government Corruption? Vote Islamic"
Farmer w18284 The Evolution of Endogenous Business Cycles
Cadena and Schoar w17020 Remembering to Pay? Reminders vs. Financial Incentives for Loan Payments
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us