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Labelled loans and human capital investments

Augsburg, Britta and Caeyers, Bet and Giunti, Sara and Malde, Bansi and Smets, Susanna (2019) Labelled loans and human capital investments. Working paper. Institute for Fiscal Studies 10.1920/wp.ifs.2019.0919. (doi:10.1920/wp.ifs.2019.0919) (KAR id:77459)


Liquidity constraints are known to significantly impede human capital investment decisions in developing countries. However, it is not obvious whether, and the extent to which, labelled microcredit - linked with the investment by name only - will boost human capital investments, particularly since money is fungible and a label is not a strong commitment. Drawing on a cluster randomised controlled trial of a sanitation microloan intervention in rural India, we show that labelled microcredit is effective in increasing sanitation investments. However, not all loans are used for sanitation investments. Testing predictions from a theoretical model that integrates loan labels provides novel evidence that loan labels influence household borrowing and investment decisions. Labelling of loans - which to date has not received much attention in the literature - is a viable strategy to improve uptake of lumpy preventive health investments.

Item Type: Reports and Papers (Working paper)
DOI/Identification number: 10.1920/wp.ifs.2019.0919
Divisions: Divisions > Division of Human and Social Sciences > School of Economics
Depositing User: Bansi Malde
Date Deposited: 15 Oct 2019 08:20 UTC
Last Modified: 08 Dec 2022 22:17 UTC
Resource URI: (The current URI for this page, for reference purposes)

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