Repayment Flexibility Reducing Financial Stress

Question 1

Authors of the paper?

Answer 1

Field et al (2012).

Question 2

Why use a RCT?

Answer 2

Studies that allow clients to self-select into either the weekly repayment schedule or the monthly repayment schedule can potentially hide the true impact of less frequent repayments on financial stress. Different types of client are likely to sort into each repayment schedule.

Question 3

Channels through which increased flexibility in repayment can influence mental stress?

Answer 3

Income - clients can invest in less liquid assets.
Self-control.
Consumption smoothing.
Time burden - monthly repayments relaxes time constraint on clients by 1.5 hours/week.

Question 4

Results?

Answer 4

Monthly clients scored lower on all financial stress indicators than weekly clients.
Monthly clients more than doubled their business income, on average, increasing their total household income by 84-88%.
Monthly clients had higher household expenditures.
No change in default when switching from weekly to monthly repayment.
Household expenditure increased by only a fraction of the increase in income (for monthly) suggesting fiscal discipline and a prioritisation of business investment.

Question 5

Where did the experiment take place?

Answer 5

INDIA.