Goldfinger strikes again!
September 27, 2012 —
Professor Goldberg's research (forthcoming in the American Economic Review) finds that improved identification of microfinance borrowers by fingerprinting led to substantially higher repayment rates for borrowers with the highest ex ante default risk.
The paper, "Credit Market Consequences of Improved Personal Identification: Field Experimental Evidence from Malawi," is joint work with Xavier Gine (World Bank) and Dean Yang (University of Michigan). It reports the results from an experiment that randomly assigned some borrowers to have their fingerprints collected at the time they applied for a loan. The intervention improved the lender's ability to implement dynamic repayment incentives by allowing it to withhold future loans from past defaulters while rewarding good borrowers with better loan terms. As predicted by a simple model, fingerprinting led to substantially higher repayment rates for borrowers with the highest ex ante default risk, but had no effect for the rest of borrowers.
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