Repayment Flexibility: Contract Choice and Investment Decisions among Indian Microfinance Borrowers
Last registered on June 08, 2017

Pre-Trial

Trial Information
General Information
Title
Repayment Flexibility: Contract Choice and Investment Decisions among Indian Microfinance Borrowers
RCT ID
AEARCTR-0002259
Initial registration date
June 08, 2017
Last updated
June 08, 2017 1:01 PM EDT
Location(s)
Region
Primary Investigator
Affiliation
Institute of Financial Management and Research (IFMR), Lead
Other Primary Investigator(s)
PI Affiliation
Institute of Financial Management and Research (IFMR), Lead
PI Affiliation
Post-Doctoral Research Fellow, Julis-Rabinowitz Center for Finance and Public Policy, Woodrow Wilson School, Princeton University
Additional Trial Information
Status
On going
Start date
2016-04-01
End date
2017-06-30
Secondary IDs
Abstract
Repayment rigidity has been shown to be particularly unfavourable for microfinance borrowers, especially in terms of investment potential: as most business activities take long to attain profitability, immediate repayments may be a great obstacle to entrepreneurship potential. Building on this premise, our intuition is that the provision of repayment flexibility will help innovation-oriented entrepreneurs who face serious growth constraints in the absence of an adequate repayment structure. To this end, the study has been set up as an RCT with a randomly selected group of microfinance borrowers under the individual-lending methodology being offered the possibility to choose between a flexible and a rigid repayment structure, although the rigid contract allowing for a lower degree of flexibility, will be cheaper and will require less collateral from the clients than the flexible one.
The impact of the provision of a flexible schedule in terms of production growth, employment and income will be observed. With this experiment, we intend to study how preferences for repayment flexibility relate to customers’ characteristics and business performance.
External Link(s)
Registration Citation
Citation
Agarwal, Parul, Giorgia Barboni and Mallika Sridhar. 2017. "Repayment Flexibility: Contract Choice and Investment Decisions among Indian Microfinance Borrowers ." AEA RCT Registry. June 08. https://www.socialscienceregistry.org/trials/2259/history/18420
Experimental Details
Interventions
Intervention(s)
Intervention Start Date
2016-04-15
Intervention End Date
2017-06-15
Primary Outcomes
Primary Outcomes (end points)
The outcomes of the study are expected to be the impact the flexible schedule of payment has on production growth, employment and income. We intend to study how preferences for repayment flexibility relate to customers’ characteristics and business performance.
Primary Outcomes (explanation)
Secondary Outcomes
Secondary Outcomes (end points)
Secondary Outcomes (explanation)
Experimental Design
Experimental Design
We intend to set up an exploratory study in which a sample of small entrepreneurs, borrowing for the first time at our partner MFI as individual borrowers, are offered the possibility to choose between a rigid, cheaper contract and a flexible, more expensive one. Our experiment is meant to get a first understanding on how the encouragement design works, and to bring preliminary evidence on the provision of a grace period. In this sense, we intend to achieve a proof of concept that could be used to design and implement the large-scale Randomized Controlled Trial. The latter will consist in randomizing our target population into two different treatments: one in which subjects are exogenously assigned a grace period, the other in which subjects are offered the choice between having or not a grace period. Subject borrowing in a rigid repayment schedule will be kept as control. The main objectives of the current exploratory study are therefore to carefully tailor the microfinance contracts (rigid versus flexible one), to assess the validity of the experimental design (whether there is enough heterogeneity among borrowers' types and subsequent choices), and to help making an accurate power calculation for the broad RCT.
Experimental Design Details
Randomization Method
The least squared distance method of randomisation was adopted to assign branches to treatment and control. The randomisation method adopted pairs branches together based on the minimum distance between two branches and randomly assigns them to treatment and control.
Randomization Unit
Data will be collected on a total of 800 households – 400 of whom have received the treatment intervention. Randomization of treatment and control branches was done at two stages – first for the 4 city branches and then the 24 non-city branches. The least squared distance method of randomisation was adopted to assign branches to treatment and control. Additionally, the sampling distribution at each of the treatment and control branches was fixed in proportion to the average monthly number of loans disbursed at each of the branches. The randomisation method adopted pairs branches together based on the minimum distance between two branches and randomly assigns them to treatment and control.
Was the treatment clustered?
No
Experiment Characteristics
Sample size: planned number of clusters
800 households- 400 of whom receive the treatment
Sample size: planned number of observations
800 households- 400 of whom receive the treatment
Sample size (or number of clusters) by treatment arms
800 households- 400 of whom receive the treatment
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB
INSTITUTIONAL REVIEW BOARDS (IRBs)
IRB Name
School of Social Science and Philosophy ,Trinity college ,Dublin
IRB Approval Date
2014-08-27
IRB Approval Number
NA
Post-Trial
Post Trial Information
Study Withdrawal
Intervention
Is the intervention completed?
No
Is data collection complete?
Data Publication
Data Publication
Is public data available?
No
Program Files
Program Files
Reports and Papers
Preliminary Reports
Relevant Papers