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How Does Contract Design Affect the Uptake of Microcredit among the Ultra-poor? Experimental Evidence from the River Islands of Northern Bangladesh

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  • Kazushi Takahashi
  • Abu Shonchoy
  • Seiro Ito
  • Takashi Kurosaki

Abstract

This study examines the demand of microcredit among ultra-poor households in northern Bangladesh. We implemented a field experiment to identify what type of credit is best suited to their demand. We found that the uptake rate by the ultra-poor is the lowest for regular small cash credit, followed by in-kind credit. We also found that the ultra-poor are significantly more likely to join a microcredit programme than the moderately poor if a grace period with longer maturity is attached to a large amount of credit, irrespective of whether the credit is provided in cash or in kind.

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  • Kazushi Takahashi & Abu Shonchoy & Seiro Ito & Takashi Kurosaki, 2017. "How Does Contract Design Affect the Uptake of Microcredit among the Ultra-poor? Experimental Evidence from the River Islands of Northern Bangladesh," Journal of Development Studies, Taylor & Francis Journals, vol. 53(4), pages 530-547, April.
    • Handle: RePEc:taf:jdevst:v:53:y:2017:i:4:p:530-547
    DOI: 10.1080/00220388.2016.1156092
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    Cited by:

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    3. Nakano, Yuko & Magezi, Eustadius F., 2020. "The impact of microcredit on agricultural technology adoption and productivity: Evidence from randomized control trial in Tanzania," World Development, Elsevier, vol. 133(C).

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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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