How do flexible microfinance contracts improve repayment rates and business outcomes?

How do flexible microfinance contracts improve repayment rates and business outcomes?

Organized by the Private Sector Development Research Network

Hosted by EBRD
Moderated by Ralph De Haas, Director of Research, EBRD

Friday, 27 October 2023 from 9-10am EST / 2-3pm London Time


Can financial innovations be offered in the presence of information frictions without increasing credit risk? Dr. Barboni’s presentation will address this question and present evidence from a randomized experiment with 799 microfinance clients holding microbusinesses in India. In treated branches, borrowers select between the standard rigid microfinance contract and a more expensive innovative contract designed to mitigate irregular business cash flows through repayment flexibility. In control branches, customers are only offered the standard contract. Offering a menu of contracts that vary in price and flexibility improves business outcomes without deteriorating repayment rates. These effects are driven by financially sophisticated microentrepreneurs selecting the flexible contract to a higher extent.

Link to the paper


Giorgia Barboni

Assistant Professor of Finance at the University of Warwick, Warwick Business School

Dr. Barboni is an Assistant Professor of Finance at the Warwick Business School, a Research Associate at CAGE, and an Invited Research at J-PAL. She was a Postdoctoral Research Scholar at the Department of Economics and Woodrow Wilson School of Public and International Affairs, Princeton University, in 2016/2018. Her research interests are in Development Economics, Financial Intermediation, Household Finance, Green Finance, and Behavioral Economics. Dr. Barboni’s current research focuses on the study of credit markets both in developing and developed countries. She is particularly interested in innovations in financial contracts and their impact on business growth and households’ financial decisions and wellbeing.

Details of Dr. Barboni’s work can be found here

Watch full seminar here


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