Group versus Individual Liability: Short and Long Term Evidence from Philippine Microcredit Lending Groups

Last registered on October 13, 2016

Pre-Trial

Trial Information

General Information

Title
Group versus Individual Liability: Short and Long Term Evidence from Philippine Microcredit Lending Groups
RCT ID
AEARCTR-0001583
Initial registration date
September 21, 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
September 21, 2016, 6:29 PM EDT

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

Last updated
October 13, 2016, 2:11 AM EDT

Last updated is the most recent time when changes to the trial's registration were published.

Locations

Primary Investigator

Affiliation
Northwestern University

Other Primary Investigator(s)

PI Affiliation
World Bank Bureau for Research and Economic Analysis of Development

Additional Trial Information

Status
Completed
Start date
2004-01-01
End date
2013-11-11
Secondary IDs
Abstract
Group liability in microcredit purports to improve repayment rates through peer screening, monitoring, and enforcement. However, it may create excessive pressure, and discourage reliable clients from borrowing. Two randomized trials tested the overall effect, as well as specific mechanisms. The first removed group liability from pre-existing groups and the second randomly assigned villages to either group or individual liability loans. In both, groups still held weekly meetings. We find no increase in short-run or long-run default and larger groups after three years in pre-existing areas, and no change in default but fewer groups created after two years in the expansion areas.
External Link(s)

Registration Citation

Citation
Giné, Xavier and Dean Karlan. 2016. "Group versus Individual Liability: Short and Long Term Evidence from Philippine Microcredit Lending Groups." AEA RCT Registry. October 13. https://doi.org/10.1257/rct.1583-2.0
Former Citation
Giné, Xavier and Dean Karlan. 2016. "Group versus Individual Liability: Short and Long Term Evidence from Philippine Microcredit Lending Groups." AEA RCT Registry. October 13. https://www.socialscienceregistry.org/trials/1583/history/11172
Sponsors & Partners

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Experimental Details

Interventions

Intervention(s)
The researchers evaluated two randomized control trials.

In the first RCT, half of the Green Bank of Caraga's existing lending centers were randomized into the treatment group. Randomization was stratified by the bank's eleven credit officers. Treatment was implemented in three waves over nine months. In the treatment group, lending centers switched from group liability to individual liability and the savings rules changed. That is, members were no longer held liable for other members' defaults, and mandatory savings were deposited entirely into individual accounts rather than split between individual, group, and center accounts. The control group maintained group liability and group saving requirements

In the second RCT, 124 candidate barangays were randomly selected for possible lending center expansion . Out of these, the bank identified and opened lending centers in 68 barangays deemed feasible by bank officers. These 68 lending centers were then randomly assigned to one of three lending products: 1) group-liability, 2) individual-liability with no group savings requirement, and 3) phased-in individual liability (group-liability for the first loan cycle, individual liability on the following after successful repayment). No group savings were required for any of the three lending schemes.
Intervention Start Date
2004-08-01
Intervention End Date
2008-07-31

Primary Outcomes

Primary Outcomes (end points)
- Several measures of default, e.g. proportion of missed weeks, proportion of past due balance at maturity, indicator for having past due, 30 days after maturity date; etc.
- Individual savings
- Loan size
- Number of accounts
- Client retention
- Number of dropouts
- Total loan disbursement
- Time on credit officer activities
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
In the first RCT, all of the Green Bank's 169 existing lending centers on the island of Leyte were randomly selected into control and treatment groups. The control group would continue receiving the bank's prior Grameen-style, group-liability lending model. Lending centers were made up of 15-30 entrepreneurial women, further divided into subgroups of five. At mandatory weekly meetings individuals made a repayment, subgroups were responsible to cover delinquencies, and lending center was responsible if a subgroup defaulted. Weekly deposits into individual, subgroup, and center savings accounts was mandatory. The treatment group were to switch to an individual-liability lending model. Borrowers were no longer liable if other borrowers were late or defaulted on their loan. Borrowers still met weekly for repayment and mandatory savings deposit amounts were unchanged, but all deposits were made into individual accounts. Conversion of the treatment group occurred in three waves over nine months. Administrative data was collected from prior, during, and after the intervention from the bank. A post-experiment activity survey of credit officers and three surveys of borrowers were collected as well.

In the second RCT, new areas for possible expansion of the bank's operations were identified. 124 villages, or barangays, were randomly selected. Of the 124, 68 barangays were selected as feasible for expansion. The selection criteria for the 68 chosen barangays was the same as the criteria for prior areas were lending centers had been established. The 68 new lending centers were randomly selected to offer one of three lending products: 1) group-liability loans, 2) individual-liability loans, and 3) phased-in individual-liability loans (group-liability for the first loan, individual-liability on subsequent loans on successful repayment). Administrative data from the bank was collected for the duration of the intervention in addition to the activity survey of credit officers and business census and social network surveys of borrowers.
Experimental Design Details
Randomization Method
randomization done in office by a computer
Randomization Unit
Randomization is at the lending center level. In the first RCT, randomization of lending centers is stratified by credit officer across three waves of implementation to ensure fairness of workload and orthogonality with respect to individual credit officer characteristics. In the second RCT, lending centers are randomized into one of three groups.
Was the treatment clustered?
Yes

Experiment Characteristics

Sample size: planned number of clusters
169 Clusters in the first RCT

68 Clusters in the second RCT
Sample size: planned number of observations
In the first RCT: 14,333 baseline clients; 6049 new clients In the second RCT: 4869 clients
Sample size (or number of clusters) by treatment arms
In the first RCT: 89 lending centers are in the control group; 80 lending centers are in the treatment group.

In the second RCT: 27 lending centers receive group-liability loans; 23 receive individual-liability loans; 18 receive phased-in individual-liability loans
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB

Institutional Review Boards (IRBs)

IRB Name
IRB Approval Date
IRB Approval Number

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
Yes
Intervention Completion Date
July 31, 2008, 12:00 +00:00
Data Collection Complete
Yes
Data Collection Completion Date
July 31, 2008, 12:00 +00:00
Final Sample Size: Number of Clusters (Unit of Randomization)
In the first RCT: 169 lending centers

In the second RCT: 68 lending centers
Was attrition correlated with treatment status?
Final Sample Size: Total Number of Observations
In the first RCT: 14,333 baseline clients; 6049 new clients

In the second RCT: 4869 clients
Final Sample Size (or Number of Clusters) by Treatment Arms
In the first RCT: 89 lending centers in the control group; 80 lending centers in the treatment group In the second RCT: 43 lending centers receive group-liability loans; 41 receive individual-liability loans; 40 receive phased-in individual-liability loans
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Abstract
Group liability in microcredit purports to improve repayment rates through peer screening, monitoring, and enforcement. However, it may create excessive pressure, and discourage reliable clients from borrowing. Two randomized trials tested the overall effect, as well as specific mechanisms. The first removed group liability from pre-existing groups and the second randomly assigned villages to either group or individual liability loans. In both, groups still held weekly meetings. We find no increase in short-run or long-run default and larger groups after three years in pre-existing areas, and no change in default but fewer groups created after two years in the expansion areas
Citation
Giné, Xavier and Karlan, Dean S. (2014), 'Group versus individual liability: Short and long term evidence from Philippine microcredit lending groups', Journal of Development Economics, 107, 65-83.

Reports & Other Materials