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The Impact of Microfinance on Social Capital and Female Empowerment in India
Last registered on October 04, 2016

Pre-Trial

Trial Information
General Information
Title
The Impact of Microfinance on Social Capital and Female Empowerment in India
RCT ID
AEARCTR-0001613
Initial registration date
October 04, 2016
Last updated
October 04, 2016 2:53 PM EDT
Location(s)
Primary Investigator
Affiliation
University of Illinois at Chicago
Other Primary Investigator(s)
PI Affiliation
Harvard University
PI Affiliation
Harvard University
PI Affiliation
Duke University
PI Affiliation
Harvard University
Additional Trial Information
Status
Completed
Start date
2006-04-01
End date
2014-06-10
Secondary IDs
Abstract
Recent research suggests that more frequent meeting can increase social capital among microfinance clients. Using random assignment of first-time borrowers to either weekly or monthly repayment groups as well as a later public goods experiment, the researchers demonstrate that borrowers assigned to weekly repayment groups interact more often and exhibit a higher willingness to pool risk with group members from their first loan cycle nearly two years after the experiment. They were also three times less likely to default on their loan. In a second intervention, the researchers find that social capital gains associated with more frequent meeting accrue across multiple lending cycles for new and existing borrowers, but the effects are heterogeneous.

External Link(s)
Registration Citation
Citation
Feigenberg, Benjamin et al. 2016. "The Impact of Microfinance on Social Capital and Female Empowerment in India." AEA RCT Registry. October 04. https://doi.org/10.1257/rct.1613-1.0.
Former Citation
Feigenberg, Benjamin et al. 2016. "The Impact of Microfinance on Social Capital and Female Empowerment in India." AEA RCT Registry. October 04. http://www.socialscienceregistry.org/trials/1613/history/11061.
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Experimental Details
Interventions
Intervention(s)
The researchers evaluated two interventions to examine the effect of the frequency of microfinance group meetings on social capital formation, informal risk sharing, default rate, and female empowerment. In the first intervention, 100 lending groups of first-time borrowers were randomized into three experimental arms where lending groups met to make loan payments monthly (control), weekly (first treatment), and a third that met weekly but repaid monthly (second treatment). In this intervention, the researchers examined the effects of weekly meetings vs. monthly meetings on social interaction, willingness to pool risk, and default rate with borrowers in monthly meetings as the control group.

In the second intervention, 148 loan groups were randomized into two experimental arms: the control arm with a monthly repayment schedule and the treatment arm with a weekly repayment schedule. The participants included first-time borrowers and repeat borrowers. In this intervention, the researchers examined the effects of weekly meetings vs. monthly meetings on long term social capital formation and female empowerment. The researchers also investigated heterogeneity of treatment effects.
Intervention Start Date
2006-04-05
Intervention End Date
2009-07-31
Primary Outcomes
Primary Outcomes (end points)
In the first intervention, key outcome variables are default rate in the subsequent loan cycle, short and long run social contact, and willingness to share risk with lending group members.

In the second intervention, key outcome variables are a group social contact variable and a pairwise social contact variable.
Primary Outcomes (explanation)
In the first intervention, social contact was measured as the average of equally-weighted z-scores of several survey questions about a borrower's contact with her group members. Willingness to share risk was measured as ticket-giving to other group members in an experiment where borrowers are asked how many of their group members they wish to enter in a lottery with themselves for a chance to win a prize voucher.

In the second intervention, the group social contact variable was measured as the average of equally-weighted z-scores of survey questions about a borrower's contact with her group members. The pairwise social contact variable was measured as the average of equally-weighted z-scores of survey questions about a borrower's contact with another group member.
Secondary Outcomes
Secondary Outcomes (end points)
Secondary Outcomes (explanation)
Experimental Design
Experimental Design
In the first intervention, 100 lending groups of all new borrowers were randomized into 3 experimental arms. The control group was made up of 38 lending groups which met monthly to make loan payments. The first treatment group was made up of 30 lending groups which met weekly to make loan payments. The second treatment group was made up of 32 lending groups which met weekly but made loan payments monthly. After the first loan cycle, all lending groups switched to a biweekly meeting and repayment schedule. Data collection consisted of a pre-disbursement baseline survey, an endline survey thirteen months after initial disbursement, monthly surveys collected at group meetings, and a lottery experiment intended to measure risk sharing.

In the second intervention, 148 lending groups of new and old borrowers were randomized into two experimental arms. The control group was made up of 74 lending groups which met monthly to make loan payments. The treatment group was made up of 74 lending groups which met weekly to make loan payments. Data collection consisted of a pre-disbursement baseline survey, an endline survey collected shortly after the loan cycle, and monthly surveys collected monthly at group meetings.
Experimental Design Details
Randomization Method
Randomization done in STATA
Randomization Unit
In the first intervention, randomization was by lending groups of 9-13 first-time borrowers.
In the second intervention, randomization was by lending groups of 5 first-time and repeat borrowers.
Was the treatment clustered?
Yes
Experiment Characteristics
Sample size: planned number of clusters
First intervention: 100 lending groups
Second intervention: 148 lending groups
Sample size: planned number of observations
First intervention: 1028 borrowers Second intervention: 739 borrowers
Sample size (or number of clusters) by treatment arms
First intervention: 38 lending groups in control; 30 lending groups in first treatment arm; 32 lending groups in second treatment arm
Second intervention: 74 lending groups in control; 74 lending groups in treatment
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB
INSTITUTIONAL REVIEW BOARDS (IRBs)
IRB Name
Study has received IRB approval. Details not available.
IRB Approval Date
Details not available
IRB Approval Number
Details not available
Post-Trial
Post Trial Information
Study Withdrawal
Intervention
Is the intervention completed?
Yes
Intervention Completion Date
July 31, 2009, 12:00 AM +00:00
Is data collection complete?
Yes
Data Collection Completion Date
September 30, 2009, 12:00 AM +00:00
Final Sample Size: Number of Clusters (Unit of Randomization)
First intervention: 100 lending groups
Second intervention: 148 lending groups
Was attrition correlated with treatment status?
No
Final Sample Size: Total Number of Observations
First intervention: 1016 borrowers in baseline survey; 961 borrowers in endline survey
Second intervention: 706 borrowers in baseline survey; 728 borrowers in endline survey
Final Sample Size (or Number of Clusters) by Treatment Arms
First intervention: 38 lending groups in control; 30 lending groups in first treatment arm; 32 lending groups in second treatment arm Second intervention: 74 lending groups in control; 74 lending groups in treatment
Data Publication
Data Publication
Is public data available?
Yes
Program Files
Program Files
No
Reports, Papers & Other Materials
Relevant Paper(s)
Abstract
As an intrinsic part of the classic microfinance model, group meetings are intended to employ social capital to ensure timely repayment. Recent research suggests that more frequent meetings can increase social capital among first-time clients. Using randomized variation in group meeting frequency for 174 microfinance groups in India, we demonstrate that social capital gains associated with more frequent meetings continue to accrue across multiple lending cycles. However, these effects are reduced when group members differ in their borrowing history. In addition, clients who start with low levels of empowerment report higher social capital gains when matched with similar clients. We discuss how current microfinance policy debates overlook the creation of social capital, including through repayment meeting frequency, and we encourage regulators to undertake a holistic understanding of microfinance's impacts.
Citation
Feigenberg, Benjamin, Erica Field, Rohini Pande, Natalia Rigol, and Shayak Sarkar. 2014. "Do Group Dynamics Influence Social Capital Gains Among Microfinance Clients? Evidence from a Randomized Experiment in Urban India.” Journal of Policy Analysis and Management, Forthcoming.
Abstract
Microfinance clients were randomly assigned to repayment groups that met either weekly or monthly during their first loan cycle, and then graduated to identical meeting frequency for their second loan. Long-run survey data and a follow-up public goods experiment reveal that clients initially assigned to weekly groups interact more often and exhibit a higher willingness to pool risk with group members from their first loan cycle nearly 2 years after the experiment. They were also three times less likely to default on their second loan. Evidence from an additional treatment arm shows that, holding meeting frequency fixed, the pattern is insensitive to repayment frequency during the first loan cycle. Taken together, these findings constitute the first experimental evidence on the economic returns to social interaction, and provide an alternative explanation for the success of the group lending model in reducing default risk.
Citation
Feigenberg, Benjamin, Erica Field, and Rohini Pande. 2013. "The Economic Returns to Social Interaction: Experimental Evidence from Microfinance." Review of Economic Studies 80(4): 1459–1483.
REPORTS & OTHER MATERIALS