Interest Rate Sensitivity Among Village Banking Clients in Mexico

Last registered on July 26, 2016
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Pre-Trial

Trial Information

General Information

Title
Interest Rate Sensitivity Among Village Banking Clients in Mexico
RCT ID
AEARCTR-0001322
Initial registration date
July 26, 2016

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
July 26, 2016, 2:44 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Country
Mexico
Region
Latin America & Carribean

Primary Investigator

Name
Dean Karlan
Affiliation
Northwestern University
Contact Primary Investigator

Other Primary Investigator(s)

PI Name
Jonathan Zinman
PI Affiliation
Dartmouth College
Contact Investigator

Additional Trial Information

Status
Completed
Start date
2006-07-31
End date
2008-12-31
Keywords
Finance & Microfinance
Additional Keywords
interest rate elasticities, interest rate policy
JEL code(s)
E43, G21, O11, O12
Secondary IDs
Abstract
The long-run price elasticity of demand for credit is a key parameter for
intertemporal modeling, policy levers, and lending practice. We use
randomized interest rates, offered across 80 regions by Mexico’s largest
microlender, to identify a 29-month dollars-borrowed elasticity of -1.9.
This elasticity increases from -1.1 in year one to -2.9 in year three. The
number of borrowers is also elastic. Credit bureau data does not show
evidence of crowd-out. Competitors do not respond by reducing rates,
perhaps because Compartamos’ profits are unchanged. The results are
consistent with multiple equilibria in loan pricing.
External Link(s)
J-PAL Evaluation Summary

Registration Citation

Citation
Karlan, Dean and Jonathan Zinman. 2016. "Interest Rate Sensitivity Among Village Banking Clients in Mexico." AEA RCT Registry. July 26. https://doi.org/10.1257/rct.1322-1.0
Former Citation
Karlan, Dean and Jonathan Zinman. 2016. "Interest Rate Sensitivity Among Village Banking Clients in Mexico." AEA RCT Registry. July 26. https://www.socialscienceregistry.org/trials/1322/history/9644
Sponsors & Partners

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Experimental Details

Interventions

Intervention(s)
Intervention Start Date
2006-07-31
Intervention End Date
2008-12-31

Primary Outcomes

Primary Outcomes (end points)
Loan amount (M$ thousands)

Loan amount for loans disbursed to new clients

Loan amount for loans disbursed to retained clients

APR (including VAT, not including forced savings)

Number of members in a group

Number of groups

Population Density in 2005

Borrowers Per Capita: (Number of Compartamos Clients in April 2007)/(Population as of 2005 Mexico Census)

Market Proportion 1: (Number of Compartamos Clients in April 2007)/(Number of Borrowers with Comparable Loans in Official Credit Bureau Data in April 2007)

Market Proportion 2: (Number of Compartamos Clients in April 2007)/(Number of Borrowers with Comparable Loans Recorded in Circulo Credit Bureau Data in April 2007)

(Number of Compartamos Clients in April 2007)/(Number of Borrowers with Comparable Loans Recorded in Merged Credit Bureau Data in April 2007)

Market Proportion 4: (Compartamos Loan Balance in $1,000s in April 2007)/(Comparable Loan Balance in Circulo Credit Bureau Data in M$ millions in April 2007)

Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
The aim of this study was to measure to determine the impact of the cost of borrowing on loan take-up, the amount borrowed, and repayment rates among microcredit borrowers.

The study was undertaken in partnership with Compartamos Banco, a for-profit, publically-traded bank and the largest microlender in Mexico, to estimate price general-equilibrium, long-run (as well as short-run) price elasticities by randomizing the interest rate offered on its core group ending product, "Credito Mujer." Compartamos randomized at the level of 80 distinct geographic regions throughout Mexico, covering 130 field offices, thousands of borrowing groups, and tens of thousands of borrowers. "Treatment" branches implemented permanent 20 percentage point (pp) reductions in the annual interest rate (on a base of roughly 100% APR), while control branches implemented permanent 10pp reductions. Elasticities were then estimated (along with other treatment effects) using administrative data from Compartamos and credit bureaus over various horizons, for up to 29 months post-treatment.

Experimental Design Details
Randomization Method
Randomization was conducted by Compartamos Banco
Randomization Unit
geographic regions
Was the treatment clustered?
Yes

Experiment Characteristics

Sample size: planned number of clusters
80 geographic regions
Sample size: planned number of observations
2,469 borrowers
Sample size (or number of clusters) by treatment arms
40/40
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
IRB Approval Date
IRB Approval Number
Analysis Plan

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
Yes
Intervention Completion Date
December 31, 2008, 12:00 +00:00
Data Collection Complete
Yes
Data Collection Completion Date
December 31, 2008, 12:00 +00:00
Final Sample Size: Number of Clusters (Unit of Randomization)
78 geographic regions
Was attrition correlated with treatment status?
No
Final Sample Size: Total Number of Observations
2,469 borrowers
Final Sample Size (or Number of Clusters) by Treatment Arms
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
No
Reports, Papers & Other Materials

Relevant Paper(s)

Abstract
The long-run price elasticity of demand for credit is a key parameter for
intertemporal modeling, policy levers, and lending practice. We use
randomized interest rates, offered across 80 regions by Mexico’s largest
microlender, to identify a 29-month dollars-borrowed elasticity of -1.9.
This elasticity increases from -1.1 in year one to -2.9 in year three. The
number of borrowers is also elastic. Credit bureau data does not show
evidence of crowd-out. Competitors do not respond by reducing rates,
perhaps because Compartamos’ profits are unchanged. The results are
consistent with multiple equilibria in loan pricing.
Citation
Karlan, Dean and Jonathan Zinman. "Long-Run Price Elasticities of Demand for Credit: Evidence form a Countrywide Field Experiment in Mexico." Working Paper, February 2013.
URL
https://www.povertyactionlab.org/sites/default/files/publications/74_14%20InterestRates_Paper%20May2013.pdf

Reports & Other Materials