COLLABORATIVE RESEARCH: Fingerprinting to Reduce Risky Borrowing
The research will quantify the credit market and household-level impacts of improved personal identification of borrowers in a developing country setting. The research implements a randomized controlled trial on technology to collect digital fingerprints of microloan borrowers in Malawi. Owing to the absence of alternative effective means of establishing personal identity, fingerprinting allows a significant improvement in the ability of Malawian lenders to implement dynamic repayment incentives, which involve conditioning future credit access on a borrower's past repayment performance. A previous study, Gine, Goldberg, and Yang (2012), found that fingerprinting leads to higher repayment and fewer behaviors related to adverse selection and moral hazard among Malawian borrowers, with impacts concentrated among the "worst" borrowers (those in the bottom quintile of credit scores.) To answer additional key questions, this study proposes a larger sample size, a longer time frame, and local-level variation in treatment intensity. In addition, also unlike the previous study, participating microlenders will provide fingerprint-matched credit records to commercial credit reference bureaus, which should increase the impact and practical relevance of the intervention. Impacts will be assessed using administrative data from microlenders in combination with two years of survey data on borrowers and loan officers.
National Science Foundation
Funding Period: 6/1/2015 to 5/31/2018