The effects of information sharing on moral hazard in credit markets: Evidence from a randomized evaluation in the Philippines Presenter: Lisa Spantig Co-authors:Kristina Czura, Matthias Fahn Abstract
The increasing popularity of microfinance resulted in fierce competition in credit markets in many developing counties. Despite the favorable notion of competition in general, the in-creased competition has led to new challenges. Recent studies find that higher levels of competition among microfinance institutions (MFIs) are related to over-indebtedness of borrowers and weakened loan repayment incentives (Campion 2001; McIntosh et al. 2005). This might partly be driven by the absence of information sharing between lenders and the increase in competition which in turn results in greater information asymmetries in the markets (Luoto et al. 2007; McIntosh et al. 2005). Information sharing via credit registries can thus be an important measure to improve the performance of microcredit markets and better access to credit for the poor. In this project we seek to answer the question how information sharing affects moral hazard in the credit market. Based on a theoretical model, we design and implement an information campaign regarding a private credit registry used by several microfinance institutions to increase knowledge on the existence of the credit registry among borrowers. Based on the model, we derive testable hypotheses how the introduction of information sharing will affect borrower’s decisions individually and in their jointliability lending group.