Impacts of large, individual, collateral-free loans for successful female group loan clients

Last registered on August 28, 2024
View Trial History

Pre-Trial

Trial Information

General Information

Title
Impacts of large, individual, collateral-free loans for successful female group loan clients
RCT ID
AEARCTR-0014250
Initial registration date
August 23, 2024

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
August 28, 2024, 3:22 PM EDT

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

Locations

There is information in this trial unavailable to the public. Use the button below to request access.

Request Information

Primary Investigator

Name
Shanthi Manian
Affiliation
World Bank, Washington State University
Contact Primary Investigator

Other Primary Investigator(s)

PI Name
Tricia Koroknay-Palicz
PI Affiliation
World Bank
Contact Investigator
PI Name
Tigist Assefa Ketema
PI Affiliation
World Bank
Contact Investigator

Additional Trial Information

Status
In development
Start date
2024-08-27
End date
2026-12-31
Keywords
Finance & Microfinance, Firms & Productivity, Gender
Additional Keywords
JEL code(s)
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
Access to credit is critical for business productivity and growth. Female entrepreneurs in Sub-Saharan Africa primarily access credit through small loans from microfinance institutions, and in Ethiopia, most women do so through group lending. Evidence suggests that the impact of these small loans on business outcomes has been limited. However, growing a business may require larger investments to address fixed costs. Nearly all larger, individual liability loans require the borrower to pledge collateral, which most women are unable to provide. We evaluate a graduation program that allows women with successful repayment histories in group loans to access uncollateralized, individual-liability loans up to 10 times larger. We explore whether such programs can expand access to credit in a manner that is sustainable for microfinance institutions.
External Link(s)

Registration Citation

Citation
Ketema, Tigist Assefa , Tricia Koroknay-Palicz and Shanthi Manian. 2024. "Impacts of large, individual, collateral-free loans for successful female group loan clients." AEA RCT Registry. August 28. https://doi.org/10.1257/rct.14250-1.0
Sponsors & Partners
Experimental Details

Interventions

Intervention(s)
Meklit microfinance is piloting an innovative approach to expanding access to credit for women business owners, by utilizing women’s group loan repayment history to generate individual credit scores, and offering women large, individual-liability, collateral-free loans on the basis of these credit scores. This “graduation” approach will provide individual loans up to 10x larger than the small group loans women were previously accessing. In addition, the loan facility requires that borrowers hold a formal business license.
Intervention Start Date
2024-09-02
Intervention End Date
2024-12-31

Primary Outcomes

Primary Outcomes (end points)
Total value of loans approved in the last three months, including individual or group liability loans from any MFI or bank
On time repayment rate for all loans in the last three months
Ownership of an operational business (business survival)
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Ever received an individual liability loan
Largest loan ever received
Average repayment delay across all loans, past three months
Value of investment in all businesses over past three months
Past month revenue from all businesses owned by woman, winsorized at 95% level.
Past three months revenue from all businesses owned by woman, winsorized at 95% level.
Total value of informal credit (i.e., family and friends) obtained in the last three months
Total number of employees in the last three months
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
Meklit has identified approximately 420 female business owners who were previously group liability loan clients and may be eligible for individual liability loans. To be eligible for the loans, a business owner must be female, own an active business with monthly turnover of at least 10,000 ETB, and have a strong repayment history as Meklit group loan client. In addition, the clients must be interested in a large individual loan. We expect approximately 50% of eligible clients to be interested in such loans.

We will randomize eligible and interested business owners into two cohorts and roll out the graduation intervention in randomized order. Under initial planning, the first cohort will form the treatment group and the second two cohort will form the control group, with the control group receiving the loans at least two months after the treatment group. We will collect follow-up data two months after the treatment group receives the loans, before the control group receives the loans.
Experimental Design Details
Not available
Randomization Method
Conducted by the researchers on a computer
Randomization Unit
Individual
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
N/A
Sample size: planned number of observations
Baseline survey: 420 Follow-up survey: 70 to 420. The exact number depends on the number of eligible clients who are interested in a large individual-liability loan.
Sample size (or number of clusters) by treatment arms
50% treatment, 50% control
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
Health Media Lab
IRB Approval Date
2024-08-26
IRB Approval Number
2640
Analysis Plan