Loan Contract Structure and Adverse Selection: Survey Evidence from Uganda 


Full reference: Ahlin, Christian, Selim Gulesci, Andreas Madestam, and Miri Stryjan. "Loan contract structure and adverse selection: Survey evidence from Uganda." Journal of Economic Behavior & Organization 172 (2020): 180-195.


While adverse selection is an important theoretical explanation for credit rationing it is difficult to quantify empirically. Many studies measure the elasticity of credit demand of existing or previous borrowers as opposed to the population at large; other studies use cross- sectional approaches that may confound borrower risk with other factors. We circumvent both issues by surveying a representative sample of microenterprises in urban Uganda and by measuring their responses to multiple hypothetical contract offers, varying in interest rates and collateral requirements. The two seminal theories on selection provide contradicting predictions following a change in the contractual terms. Under adverse selection, a lower interest rate or a lower collateral obligation should increase take up among less risky borrowers. By contrast, advantageous selection implies that take up should increase among the riskier borrowers. We test these two predictions by examining if firm owners respond to changes in the interest rate or the collateral requirement and whether higher take up varies by firms’ risk type. We find support for the presence of adverse selection as contracts with lower interest rates or lower collateral obligations increase hypothetical demand – especially for less risky firms. Our results imply that changes to the standard loan product available to microenterprises may have substantial effects on credit demand.

Leader Selection and Service Delivery in Community Groups: Experimental Evidence from Uganda

Full reference: Deserranno, Erika, Miri Stryjan, and Munshi Sulaiman. 2019. "Leader Selection and Service Delivery in Community Groups: Experimental Evidence from Uganda." American Economic Journal: Applied Economics, 11 (4): 240-67.

In developing countries, NGOs and Governments often rely on local community-based groups for the delivery of financial and public services. This paper provides causal evidence of how the design of rules used for group leader selection affects leader identity and shapes group service delivery. In collaboration with the NGO BRAC, we randomly assigned newly-formed Savings and Loan Groups to select their leaders using either (i) a procedure in which final outcomes are decided in a public discussion or (ii) a procedure in which final outcomes are decided in a private vote. Leaders selected with a private vote are found to be less positively selected on socioeconomic characteristics than those elected in the public procedure, and at the same time more representative of regular group members. Furthermore, selecting more representative leaders—through a private vote—results in groups that are more inclusive towards poor members by giving them more credit and retaining them longer. Three years after their creation, private vote groups are more inclusive than public discussion groups, without being less economically efficient.

Media: VoxDev Talks (Podcast)World Bank Development Impact Blog


Book Chapter (in Hebrew): Financial Inclusion and social outcomes, Miri Stryjan & Reut Barak Weekes, in Y. N Gez, R. Barak-Weekes and M. Kagan (eds) "International Development in Africa", Pardes books, 2019. 

הכללה פיננסית והשלכותיה החברתיות   בספר ״פיתוח בינלאומי באפריקה״ עורכים י. נ' גז, ר. ברק וויקס, ומ. כגן

הוצאה פרדס 2019

M. Stryjan, 2009. Sending money home - Remittances from the Somali diaspora in Sweden (in Swedish), Ekonomisk Debatt no. 3, 2009 (Original title "Att skicka pengar till hemlandet – Remitteringar från den somaliländska diasporan i Sverige").

© 2018 by Miri Stryjan.

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