Cost-Effective Field Information Acquisition
RCTReview
Implementing complex mechanism designs and peer-incentive surveys in low-income lending markets can impose administrative and financial overhead on microfinance institutions. Evaluating whether the incremental administrative cost of collecting and incentivizing community information is offset by higher enterprise returns determines the commercial viability of peer targeting.
Picture this
Imagine a bank spending a tiny extra fee of under a dollar per client to conduct a quick neighborhood poll with small accuracy prizes. Because the poll identifies high-performing business owners who generate triple the usual profits, the bank's small upfront investment in gathering peer information yields massive economic returns compared to its minimal cost.
What the evidence says
Collecting community information and providing truthfulness incentives adds an estimated INR 40 (US$0.70) per loan, which is substantially lower than the generated monthly returns of 24-30% (or US$11.40 extra monthly household profits) achieved by high-potential entrepreneurs.
- Who was studied
- 1,345 households in 274 peer groups across Amravati, Maharashtra, India.
- How
- Cost-effectiveness calculation estimating the per-loan administrative and incentive cost of community information collection relative to monthly profit gains generated by high-potential microentrepreneurs.
What to do
Incorporate small financial accuracy bonuses into peer-survey protocols during loan underwriting to acquire high-value targeting data at nominal marginal cost.
From the source
"Researchers suggest that if lenders were to collect community information and provide incentives to respondents, the cost of lending would increase by INR 40 (US$ 0.7) per loan, an amount far less than the estimated gains for high-potential microentrepreneurs."
Impact_of_Community_Information_in_Identifying_High_Ability_Microentrepreneurs.pdf