Multi-Dimensional Responsiveness Index
RCTReview
Microfinance contract flexibility does not produce uniform gains across all clients, making it necessary to evaluate composite borrower characteristics to prevent misallocating grace period loans to non-responsive entrepreneurs.
Picture this
Giving a high-end kitchen setup to a group of people will not help everyone equally; professional chefs will double their output, whereas people who do not cook or lack time will see no benefit at all.
What the evidence says
Grace period treatment increases profits by 109.2% for borrowers with 0 non-responder traits (10% of sample), 70.9% for borrowers with 1 trait (36% of sample), 20.9% for borrowers with 2 traits (35% of sample), and has no significant effect for borrowers with 3 or more traits (19% of sample).
- Who was studied
- N = 752 female microfinance borrowers in urban Kolkata, India.
- How
- OLS regression analyzing weekly profit gains three years post-disbursement interacted with a composite index (0 to 4 traits) of non-responder characteristics.
What to do
Deploy composite diagnostic screening tools during MFI intake to target flexible repayment contracts to borrowers possessing zero or one non-responder trait.
From the source
"Accounting for average profits in the corresponding subsamples, our treatment effects on the treated imply an increase in profits of 20.9 percent for the 35 percent of the sample with two non-responder traits, 70.9 percent for the 36 percent of the sample with one non-responder trait, and 109.2 percent for the 10 percent of the sample with zero non-responder traits."
101_290 microfinance and entrepreneurship AER2013.pdf