Imperfect capital markets and commitment problems impede lumpy human capital investments. Labelled loans can alleviate both constraints, but little is known about their effectiveness in practice. We draw on a cluster randomized controlled trial in rural India to provide the first evidence that labelled microcredit is effective in increasing take-up of a lumpy human capital investment, a safe toilet. Testing predictions from a theoretical model provides novel evidence that loan labels influence household borrowing and investment decisions. Not all loans are used for sanitation investments, suggesting that loan labels offer a soft commitment incentive.

Augsburg, B., Caeyers, B., Giunti, S., Malde, B., Smets, S. (2021). Labelled Loans and Human Capital Investments [Working paper] [10.1920/wp.ifs.2021.921].

Labelled Loans and Human Capital Investments

Giunti, S
;
2021

Abstract

Imperfect capital markets and commitment problems impede lumpy human capital investments. Labelled loans can alleviate both constraints, but little is known about their effectiveness in practice. We draw on a cluster randomized controlled trial in rural India to provide the first evidence that labelled microcredit is effective in increasing take-up of a lumpy human capital investment, a safe toilet. Testing predictions from a theoretical model provides novel evidence that loan labels influence household borrowing and investment decisions. Not all loans are used for sanitation investments, suggesting that loan labels offer a soft commitment incentive.
Working paper
Scientifica
Microfinance, Labelled Loans, Sanitation, Human Capital, India
English
Augsburg, B., Caeyers, B., Giunti, S., Malde, B., Smets, S. (2021). Labelled Loans and Human Capital Investments [Working paper] [10.1920/wp.ifs.2021.921].
Augsburg, B; Caeyers, B; Giunti, S; Malde, B; Smets, S
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/316760
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