Two Sides of the Same Rupee? Comparing Demand for Microcredit and Microsaving in a Framed Field Experiment in Rural Pakistan

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  • This article has been accepted for publication and undergone full peer review but has not been through the copyediting, typesetting, pagination and proofreading process, which may lead to differences between this version and the Version of Record. Please cite this article as doi: 10.1111/ecoj.12512

Abstract

We use a field experiment to test whether saving and borrowing satisfy demand for lump-sum accumulation from regular deposits. Inspired by ROSCAs, we offer different credit and savings contracts to subjects. We find that individuals often accept both credit and saving contract across experimental waves. This behaviour can be rationalised by assuming that individuals seek lump-sum payments and struggle to hold savings. Structural estimation of this model accounts for the behaviour of 75% of participants. Of these, two-thirds have high demand for lump-sum accumulation but savings difficulties. These results imply that the distinction between microlending and microsaving is largely illusory.

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