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

Gharad Bryan (), Dean Karlan and Jonathan Zinman
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Gharad Bryan: London School of Economics

Working Papers from Economic Growth Center, Yale University

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.

Keywords: Information asymmetries; credit market failures; peer networks; social capital; social networks (search for similar items in EconPapers)
JEL-codes: C93 D12 D14 D82 O12 O16 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2012-01
New Economics Papers: this item is included in nep-afr, nep-exp, nep-mfd and nep-soc
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Citations: View citations in EconPapers (1)

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http://www.econ.yale.edu/growth_pdf/cdp1009.pdf (application/pdf)

Related works:
Working Paper: You Can Pick Your Friends, But You Need to Watch Them: Loan Screening and Enforcement in a Referrals Field Experiment (2012)
Working Paper: You Can Pick Your Friends, But You Need to Watch Them: Loan Screening and Enforcement in a Referrals Field Experiment (2012)
Working Paper: You Can Pick Your Friends, but You Need to Watch Them: Loan Screening and Enforcement in a Referrals Field Experiment (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:egc:wpaper:1009

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