1. Screening Incentive Group: Referrers in the first group received a bonus if the person they referred was approved for a loan. As a result, they had an incentive to screen for candidates who were likely to get approved for a loan based on observable characteristics.
2. Screening and Enforcement Incentive Group: Referrers in the second group received a bonus if the person they referred was approved and subsequently repaid the loan on time. They had an incentive to both screen for creditworthiness and encourage repayment.
Once the referrals were approved, researchers introduced a second stage of randomization, which changed the initial set of incentives that referrers faced.
1.a. After loan approval, no change. 1.b. After loan approval, enforcement incentive added (ie. offered an additional bonus of US$12 if the person they referred repaid the loan)
2.a. After loan approval, enforcement incentive removed, (ie. received a bonus as soon as their referee’s loan was approved.) 2.b. After loan approval, no change.