Goldberg, JessicaGiné, XavierYang, Dean2012-03-192012-03-192010-10-01https://hdl.handle.net/10986/3921How do borrowers respond to improvements in a lender's ability to punish defaulters? This paper reports the results of a randomized field experiment in rural Malawi that examines the impact of fingerprinting borrowers in a context where a unique identification system is absent. Fingerprinting allows the lender to more effectively use dynamic repayment incentives: withholding future loans from past defaulters while rewarding good borrowers with better loan terms. Consistent with a simple model of borrower heterogeneity and information asymmetries, fingerprinting led to substantially higher repayment rates for borrowers with the highest ex ante default risk, but had no effect for the rest of the borrowers. The change in repayment rates is driven by reductions in adverse selection (smaller loan sizes) and lower moral hazard (for example, less diversion of loan-financed fertilizer from its intended use on the cash crop).CC BY 3.0 IGOACCESS TO CAPITALACCESS TO CREDITACCESS TO FORMAL CREDITACCOUNTINGADVERSE SELECTIONAGRICULTURAL ECONOMICSAGRICULTURAL LOANAGRICULTURAL LOANSAGRICULTUREAPPROVAL RATESASYMMETRIC INFORMATIONBANKRUPTCYBARTERBORROWERBORROWER BEHAVIORBORROWER BEHAVIORSBORROWINGBRANCHCASH FLOWSCHECKSCOLLATERALCOMPANYCOMPETITORCONSUMER BANKRUPTCIESCONSUMER CREDITCONSUMER FINANCECONSUMER LOANCONSUMER LOANSCONVERSIONSCORRUPTIONCOST ANALYSISCREDIBILITYCREDIT ACCESSCREDIT AVAILABILITYCREDIT BUREAUCREDIT BUREAUSCREDIT CARDCREDIT CARDSCREDIT CONTRACTCREDIT DENIALCREDIT EXPANSIONSCREDIT HISTORIESCREDIT HISTORYCREDIT HISTORY INFORMATIONCREDIT INFORMATIONCREDIT MARKETCREDIT MARKETSCREDIT OFFICERCREDIT OFFICERSCREDIT PERFORMANCECREDIT PROVIDERSCREDIT REPORTINGCREDIT SCOREDEBTDEBT RECOVERYDEFAULT INFORMATIONDEFAULT RISKDEFAULTERSDEPENDENTDEPOSITDEVELOPING COUNTRIESDEVELOPMENT ECONOMICSDONOR AGENCYDOWN PAYMENTDUMMY VARIABLEDUMMY VARIABLESECONOMETRIC MODELSECONOMETRICSECONOMIC DEVELOPMENTECONOMIC RESEARCHECONOMIC THEORYECONOMICS RESEARCHEQUIPMENTEQUIPMENT COSTSEXCHANGE RATEEXCLUSIONEXPANSIONEXPORT CROPSFARMERFARMERSFEDERAL RESERVEFEDERAL RESERVE BANKFEDERAL RESERVE SYSTEMFINANCE CORPORATIONFINANCIAL DEVELOPMENTFINANCIAL INNOVATIONSFINANCIAL INSTITUTIONFINANCIAL INTERMEDIATIONFINANCIAL MARKETSFINANCIAL RESOURCESFINANCIAL SUSTAINABILITYFIRMSFORMAL CREDITFORMAL LOANFORMAL LOANSFULL REPAYMENTFUNCTIONAL FORMSFUNGIBLEFUTURE CREDITFUTURE LOANSFUTURE RESEARCHFUTURE STUDIESGDPGOOD CREDITGREATER ACCESSGREEN REVOLUTIONGROUP BORROWERSHIDDEN INFORMATIONHOLDINGHOUSEHOLD BANKRUPTCYIDIMPACT OF DEBTINCENTIVE EFFECTSINCOMEINEQUALITYINFORMAL INSURANCEINFORMATION ASYMMETRIESINFORMATION ON BORROWERSINFORMATION SHARINGINFORMATION TECHNOLOGYINITIAL LOANINSURANCE MARKETINSURANCE MARKETSINTEREST RATEINTERNATIONAL BANKINVESTINGJOINT LIABILITYLABOR MARKETSLATE PAYMENTSLEGAL PROCEEDINGSLEGAL REFORMLENDERLENDERSLIMITED ACCESSLIQUID ASSETSLOANLOAN AMOUNTLOAN APPLICANTSLOAN APPLICATIONLOAN APPLICATIONSLOAN APPROVALLOAN CONTRACTSLOAN CUSTOMERSLOAN DECISIONSLOAN MARKETSLOAN MATURITYLOAN OFFICERLOAN OFFICERSLOAN POOLLOAN REPAYMENTLOAN REPAYMENTSLOAN SIZELOAN SIZESLOAN TERMSMACROECONOMICSMARKET INFORMATIONMARKET VALUEMATURITY DATEMICRO DATAMICROCREDITMICROFINANCEMICROFINANCE INSTITUTIONMORAL HAZARDNATIONAL CREDITOUTSTANDING BALANCEOUTSTANDING BALANCESPERSONAL BANKRUPTCIESPOLITICAL ECONOMYPOSITIVE EFFECTSPOTENTIAL BORROWERSPRINCIPAL AGENT MODELPRIVATE CREDITPROBABILITY OF DEFAULTPROBABILITY OF REPAYMENTPRODUCTION INPUTSPRODUCTIVE INVESTMENTPROFITABILITYPROSPECTIVE BORROWERSPUBLIC POLICYREPAYMENTREPAYMENT INCENTIVESREPAYMENT PERFORMANCEREPAYMENT RATEREPAYMENT RATESREPAYMENTSREPUDIATIONRISK SHARINGRURAL CREDITRURAL CREDIT MARKETSRURAL FINANCERURAL FINANCIAL MARKETSSAVINGSSAVINGS ACCOUNTSAVINGS PRODUCTSMALLHOLDERSMALLHOLDER FARMERSSUPPLIERSUPPLY OF CREDITTRANSACTIONTRANSACTION COSTSTURNOVERURBAN AREASVILLAGEVILLAGESWorld Bank10.1596/1813-9450-5438