How to reduce microfinance default? The survey says…

Relative to clients who met on a monthly basis during their first loan, those who met weekly are three and a half times less likely to default on their subsequent loan.

Experimental and survey evidence suggests that the decline is driven by improvements in informal risk-sharing that result from more frequent social interaction outside of meetings.

Hm. Familiarity does not breed contempt.

A new paper by Feigenberg, Field and Pande.

2 thoughts on “How to reduce microfinance default? The survey says…

  1. Not a big surprise! In the 90s Grameen Bank experimented with monthly instead of week repayment schedule. The borrowers complain that they prefer the weekly meeting because it gets them a chance to get out of the house. Moreover, a monthly payment increases the size of the installment and the borrowers complain that it is harder for them to scrounge up funds for repayment. Obviously, no one would believe the explanation because it was not randomized and did not spend hundred and thousands of dollars!