American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Behavioral Foundations of Microcredit: Experimental and Survey Evidence from Rural India
American Economic Review
(pp. 1118–39)
Abstract
We use experimental measures of time discounting and risk aversion for villagers in south India to highlight behavioral features of microcredit, a financial tool designed to reduce poverty and fix credit market imperfections. The evidence suggests that microcredit contracts may do more than reduce moral hazard and adverse selection by imposing new forms of discipline on borrowers. We find that, conditional on borrowing from any source, women with present-biased preferences are more likely than others to borrow through microcredit institutions. Another particular contribution of microcredit may thus be to provide helpful structure for borrowers seeking self-discipline. (JEL G21, I38, O15, O16, O18)Citation
Bauer, Michal, Julie Chytilová, and Jonathan Morduch. 2012. "Behavioral Foundations of Microcredit: Experimental and Survey Evidence from Rural India." American Economic Review 102 (2): 1118–39. DOI: 10.1257/aer.102.2.1118Additional Materials
JEL Classification
- G21 Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- I38 Welfare and Poverty: Government Programs; Provision and Effects of Welfare Programs
- O15 Economic Development: Human Resources; Human Development; Income Distribution; Migration
- O16 Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O18 Economic Development: Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure