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Title:You can pick your friends, but you need to watch them: Loan screening and enforcement in a referrals field experiment PDF Logo
Authors:Bryan, Gharad
Karlan, Dean
Zinman, Jonathan
Issue Date:2012
Series/Report no.:Discussion Paper, Economic Growth Center 1009
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.
Subjects:information asymmetries
credit market failures
peer networks
social capital
social networks
JEL:C93
D12
D14
D82
O12
O16
Document Type:Working Paper
Appears in Collections:Center Discussion Papers, Economic Growth Center (EGC), Yale University

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