Title of the dataset:
Data underlying the publication: "Liquidity defaults and progressive lending in microfinance: A lab‐in‐the field experiment in Bolivia"

Creators:
Tinka Koster		- ORCID:
International Policy, Wageningen University & Research
Francesco Cecchi	-ORCID: 0000-0002-2571-5411
Development Economics, Wageningen University & Research


Contributors:
Robert Lensink		- ORCID: 0000-0001-6448-5164
Development Economics, Wageningen University & Research


Related publication:
Cecchi, F., Koster, T., & Lensink, R. (2021). Liquidity defaults and progressive lending in microfinance: A lab‐in‐the field experiment in Bolivia. Review of Development Economics, 25(4), 2013-2030.
DOI: https://doi.org/10.1111/rode.12807

Description:
Many microfinance institutions (MFIs) use dynamic incentives in combination with progressive lending schemes to reduce defaults. However, the specific role of progressive lending has never been tested empirically, while observational evidence in other contexts points to potentially adverse effects. Using an experimental approach, we study the impact of progressive lending on overborrowing, attending to the possibility that progressive lending may actually increase liquidity defaults. We organize a framed field experiment in the municipality of Coroico, Bolivia, inviting 271 members of an MFI to participate in an experimental game. In Bolivia, the penetration rates of microfinance are among the highest in the world, progressive lending systems are a common practice, and the concept and practices of microfinance are well known among most people. We find that participants who borrowed over multiple rounds with progressively increasing borrowing caps showed increased liquidity defaults once the caps became unconstraining compared to those without progressive lending. We speculate that this result stems from anchoring borrowing loan requests on the credit limit set by the lender and formalize this rationale in a model for credit demand and naive borrowers. MFIs should consider the potential perverse anchoring effects of progressive lending when designing policies aimed at reducing overborrowing.

Keywords:
Microfinance
Lab-in-the-field
Progressive lending
Liquidity defaults
Anchoring

Spatial coverage:
Coroico
Bolivia
South America

Temporal coverage:
2015

This dataset contains the following files:
progressive lending data_publishable.csv
Codebook_variables_progressive lending.csv

Explanation of variables:
Treatment 1: progressive lending system (T1). In line with common microfinance policies in Bolivia, credit limits increased gradually. In the first round, the credit limit was set at 6 Bs such that participants could borrow for only up to three cups (highly credit constrained). In the next rounds, the debt limits were set at 12, 18, and 24 Bs, respectively. The limit of the last round was deliberately set higher than the expected optimal borrowing level, based on pilot tests.

Treatment 2: no borrowing limit (T2): participants could borrow whatever they want in all rounds.

Treatment 3: high credit limit (T3): 24 Bs in all rounds; higher-than-expected optimal borrowing.



This dataset is published under the CC BY (Attribution) license.
This license allows reusers to distribute, remix, adapt, and build upon the material in any medium or format, so long as attribution is given to the creator.

