Publication |
2012
Abstract
Microcredit is celebrated as an innovative tool to reduce poverty. We integrate experimental measures of time discounting and risk aversion for a sample of 573 villagers in south India with survey data on their financial activity.
The data show that the demand for microcredit loans is tied to time-inconsistent preferences. Women with hyperbolic preferences save less at home and save less in total levels.
They are also more likely to borrow generally, but to do so through microcredit institutions specifically. The finding suggests that the structure of microcredit loan contracts helps people with self-discipline problems who lack suitable saving devices.