We experimentally test the impact of expanding access to basic bank accounts in Uganda, Malawi, and Chile. Over two years, 17 percent, 10 percent, and 3 percent of treatment individuals made five or more deposits, respectively. Average monthly deposits for them were at the 79th, 91st, and 96th percentiles of baseline savings. Survey data show no clearly discernible intention-to-treat effects on savings or any downstream outcomes. This suggests that policies merely focused on expanding access to basic accounts are unlikely to improve welfare noticeably since impacts, even if present, are likely small and diverse.
To Charge or Not to Charge: Evidence from a Health Products Experiment in Uganda - Working Paper 387
In a field experiment in Uganda, we find that demand after a free distribution of three health products is lower than after a sale distribution.
We partnered with a micro-lender in Mali to randomize credit offers at the village level. Then, in no-loan control villages, we gave cash grants to randomly selected households. These grants led to higher agricultural investments and profits, thus showing that liquidity constraints bind with respect to agricultural investment.
The poor can and do save, but often use formal or informal instruments that have high risk, high cost, and limited functionality. This could lead to undersaving compared to a world without market or behavioral frictions.
Mixed Method Evaluation of a Passive Health Sexual Information Texting Service in Uganda - Working Paper 332
We evaluate the impact of a health information intervention implemented through mobile phones, using a clustered randomized control trial augmented by qualitative interviews. The intervention aimed to improve sexual health knowledge and shift individuals towards safer sexual behavior by providing reliable information about sexual health. The novel technology designed by Google and Grameen Technology Center provided automated searches of an advice database on topics requested by users via SMS. It was offered by MTN Uganda at no cost to users.
Win Some Lose Some? Evidence from a Randomized Microcredit Program Placement Experiment by Compartamos Banco - Working Paper 330
Theory and evidence have raised concerns that microcredit does more harm than good, particularly when offered at high interest rates. We use a clustered randomized trial, and household surveys of eligible borrowers and their businesses, to estimate impacts from an expansion of group lending at 110% APR by the largest microlender in Mexico.
Hoping to Win, Expected to Lose: Theory and Lessons on Microenterprise Development - Working Paper 312
How do entrepreneurs learn whether they have what it takes to manage larger businesses? It's likely through experimentation. In this paper, Dean Karlan, Ryan Knight, and Christopher Udry develop a model to help understand the impediments to experimentation and the benefits to giving it a try.
This paper details that results of an experiment in northern Ghana in which small-scale farmers were randomly given different kinds of potentially risk-reducing assistance.
How Can Bill and Melinda Gates Increase Other People’s Donations to Fund Public Goods? - Working Paper 292
The reasons why people give to charities vary from individual to individual, but it is clear that large, public gifts to a charity from well-known donors increase the number and size of smaller individual gifts. In this working paper, Dean Karlan and John A. List show that the effect has to do with overcoming the asymmetry of knowledge about the quality of the charity.
Group Versus Individual Liability: A Field Experiment in the Philippines - Working Paper 111, updated May 2009
Group liability--wherein individuals are both borrowers and guarantors of other client's loans--is often described as the key innovation that led to the explosion of microcredit. It is thought to create incentives for peers to screen, monitor and enforce each other's loans. But some argue that group liability actually discourages good clients from borrowing, jeopardizing growth and sustainability. In this working paper, CGD non-resident fellow Dean Karlan and his co-author discuss the results of a field experiment at a bank in the Philippines, where they randomly reassigned half of the existing group liability centers as individual liability centers. They find that converting group liability to individual liability, while keeping aspects of group lending like weekly repayments and common meeting place, does not affect the repayment rate, and actually attracts new clients. This paper is one in a series of six CGD working papers by Dean Karlan on various aspects of microfinance (Working Paper Nos. 106 –111).
Observing Unobservables: Identifying Information Asymmetries with a Consumer Credit Field Report - Working Paper 109
Information asymmetries--which occur when one party to a transaction has more or better information than the other party--can cause inefficiency, over-investment, or poverty traps. Unfortunately, they are difficult to identify in practice. In this working paper, CGD non-resident fellow Dean Karlan and his co-author identify two kinds of information asymmetries: adverse selection (where sellers lack information) and moral hazard (where buyers or borrowers lack information). The authors randomize loan pricing using 58,000 direct mail offers along three dimensions: an initial "offer interest rate", the actual interest rate on the loan contract, and the interest rate on future loans. They find that 7% to 16% of default on loans is due to asymmetric information problems. This paper is one in a series of six CGD working papers by Dean Karlan on various aspects of microfinance (Working Paper Nos. 106 –111).
Policymakers often urge microfinance institutions to increase interest rates to eliminate reliance on subsidies. This makes sense if the poor will borrow regardless of interest rates: then micro lenders increase profitability without reducing the poor's access to credit. But there is little evidence as to whether this is actually true. In this working paper, CGD non-resident fellow and his co-author test the elasticity of demand for microcredit using field data from South Africa. They find that price sensitivity increased sharply when individuals were offered a rate above their prior loan's rate. They also found that loan size is far more responsive to changes in loan maturity than to changes in interest rates. This paper is one in a series of six CGD working papers by Dean Karlan on various aspects of microfinance (Working Paper Nos. 106 –111).
Expanding Credit Access: Using Randomized Supply Decisions to Estimate the Impacts - Working Paper 108
Microfinance is generally credited with helping to alleviate poverty and improve the lives of the poor. But as microfinance institutions move beyond entrepreneurial credit to offering consumer loans, many practitioners and policymakers are skeptical about "unproductive" lending. In this working paper, CGD non-resident fellow Dean Karlan and his co-author examine the effects of expanding consumer credit using a field experiment in which some loan applicants who had been denied credit were randomly selected to be "unrejected" for a loan. They find that compared to those who did not receive credit, borrowers showed increased employment, reduced hunger and poverty, while also being profitable for the lender. This paper is one in a series of six CGD working papers by Dean Karlan on various aspects of microfinance (Working Paper Nos. 106-111).
Teaching Entrepreneurship: Impact of Business Training on Microfinance Clients and Institutions - Working Paper 107, updated May 2009
Can one teach basic entrepreneurship skills? A growing number of microfinance organizations are trying, in the hopes of improving the livelihood of their clients and to further their mission of poverty alleviation. In this working paper, CGD non-resident fellow Dean Karlan and his co-author measure the impact of adding business training to a Peruvian group lending program for female microentrepreneurs. Their findings--that training leads to increased business knowledge, practices and revenues--are contrary to the presumption (on which the microfinance movement was largely based) that credit constraints alone, not skills, are the obstacle to the entrepreneurial poor. This paper is one in a series of six CGD working papers by Dean Karlan on various aspects of microfinance (Working Paper Nos. 106–111).
Microfinance is often viewed as a tool for empowering women. However, it is not clear that increasing a woman's share of household income also improves her status within the household. In this working paper, CGD non-resident fellow Dean Karlan and his co-authors examine whether access to individually held savings accounts leads to an increase in female decision-making power within the household. They find positive impacts, particularly for women who start with below-average decision-making power; there is a shift towards the purchase of female-oriented durables in the household. This paper is one in a series of six CGD working papers by Dean Karlan on various aspects of microfinance (Working Paper Nos. 106–111).