Expanding Credit Access: Using Randomized Supply Decisions to Estimate the Impacts
Dean Karlan,Jonathan Zinman +1 more
TL;DR: In this article, the impacts of expanding access to consumer credit at a 200% annual percentage rate (APR) using a field experiment and follow-up data collection were investigated.
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Abstract: Expanding access to commercial credit is a key ingredient of financial development strategies. There is less consensus on whether expanding access to consumer credit helps borrowers, particularly when loans are extended at high interest rates. Popular skepticism about "unproductive," "usurious" lending is fueled by research highlighting behavioral biases that may induce overborrowing. We estimate the impacts of expanding access to consumer credit at a 200% annual percentage rate (APR) using a field experiment and follow-up data collection. The randomly assigned marginal loans produced significant net benefits for borrowers across a wide range of outcomes. There is also some evidence that the loans were profitable. The Author 2009. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oxfordjournals.org, Oxford University Press.
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Figures
Table 2 Experiment validity and compliance 
Table 1 Demographics 
Table 5 Treatment effects on credit bureau scores one and two years later Dependent variable: 1 = any ordinal 1 = any ordinal 
Table 3 Intention-to-treat effects on borrowing and access 
Table 6 Estimated profitability of marginal and inframarginal loans 
Table 4 Intention-to-treat estimates for summary index outcome measures
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