Publications
Publications
- 2024
Loan Officers Impede Graduation From Microcredit: Evidence from a Large Microfinance Institution
By: Natalia Rigol and Benjamin N. Roth
Abstract
Graduating microcredit borrowers to larger loans can increase livelihoods. We demonstrate that loan officers impede borrower graduation due to common features of their compensation. Through an experiment with one of Chile’s largest microfinance institutions (MFIs), we change loan officer compensation and find they refer more borrowers for graduation. Borrowers referred after the change repay graduation loans at higher rates and their businesses grow more. Using novel data, we document that about half of MFIs have internal graduation programs, and of these, 48% employ the same compensation practices as our partner. Loan officer incentives may therefore deter borrower graduation worldwide.
Keywords
Loan Officers; Strategic Behavior; Strategic Disclosure; Microfinance; Financial Institutions; Financing and Loans
Citation
Rigol, Natalia, and Benjamin N. Roth. "Loan Officers Impede Graduation From Microcredit: Evidence from a Large Microfinance Institution." NBER Working Paper Series, No. 29427, October 2021. (Revise and Resubmit, Journal of Political Economy.)