Rohini Pande Photo

Rohini Pande

Appointment
Rafik Hariri Professor of International Political Economy
Office Address
79 John F. Kennedy St. Rubenstein Bldg 340
617-384-5267
Email Mailing Address
Field, Erica, Rohini Pande, John Papp, and Natalia Rigol. "Does the Classic Microfinance Model Discourage Entrepreneurship among the Poor? Experimental Evidence from India." American Economic Review 103.6 (October 2013): 2196-2226.

Abstract

Do the repayment requirements of the classic microfinance contract inhibit investment in high-return but illiquid business opportunities among the poor? Using a field experiment, we compare the classic contract which requires that repayment begin immediately after loan disbursement to a contract that includes a two-month grace period. The provision of a grace period increased short-run business investment and long-run profits but also default rates. The results, thus, indicate that debt contracts that require early repayment discourage illiquid risky investment and thereby limit the potential impact of microfinance on microenterprise growth and household poverty.