From a new working paper by Xavier Giné, Jessica Goldberg, and Dean Yang:
We report the results of a randomized field experiment that examines the credit market impacts of improvements in a lender’s ability to determine borrowers’ identities. Improved personal identification enhances the credibility of a lender’s dynamic repayment incentives by allowing it to withhold future loans from past defaulters and expand credit for good borrowers. The experimental context, rural Malawi, is characterized by an imperfect identification system. 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).
“Admitting Failure”: Corporate Social Responsibility By Any Other Name?
For quite some time, I had been meaning to write about the seemingly new “admitting failure” phenomenon in development policy. That idea, however, had been pushed back by other, more pressing ideas.
Thankfully, Ed Carr, my favorite online sparring partner, wrote the following last week:
(…) I wonder about the utility of these admitting failure efforts that I see coming from groups like Engineers without Borders. I had the good fortune to catch up with Tom Murphy (or, as the twitterati know him, @viewfromthecave) the other day while he was here in DC, and we started talking about learning from failure. In the course of our conversation, we came around to two key problems. First, really admitting failure requires reframing the public image of development as an inherently do-no-harm effort, where just doing something is better than nothing. Second, given this first problem, when we really start talking about what failure means, even in the most constructive of settings, we will call the entire development enterprise into question.
I don’t have much to say about the two points Ed and Tom brought up — that is really their area, and Ed summarizes their discussion nicely. But I can offer my economist’s take on admitting failure.