Replication data for: Does the Classic Microfinance Model Discourage Entrepreneurship among the Poor? Experimental Evidence from India

Principal Investigator(s): View help for Principal Investigator(s) Erica Field; Rohini Pande; John Papp; Natalia Rigol

Version: View help for Version V1

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Project Citation:

Field, Erica, Pande, Rohini, Papp, John, and Rigol, Natalia. Replication data for: Does the Classic Microfinance Model Discourage Entrepreneurship among the Poor? Experimental Evidence from India. Nashville, TN: American Economic Association [publisher], 2013. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-10-11. https://doi.org/10.3886/E112672V1

Project Description

Summary: Do the repayment requirements of the classic microfinance contract inhibit investment in high-return but illiquid business opportunities among the poor? Using a field experiment, we compare the classic contract which requires that repayment begin immediately after loan disbursement to a contract that includes a two-month grace period. The provision of a grace period increased short-run business investment and long-run profits but also default rates. The results, thus, indicate that debt contracts that require early repayment discourage illiquid risky investment and thereby limit the potential impact of microfinance on microenterprise growth and household poverty.

Scope of Project

JEL Classification:
      A21 Economic Education and Teaching of Economics: Pre-college
      G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
      I32 Measurement and Analysis of Poverty
      L25 Firm Performance: Size, Diversification, and Scope
      L26 Entrepreneurship
      O15 Economic Development: Human Resources; Human Development; Income Distribution; Migration
      O16 Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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V1 [2019-10-11]

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