Working Paper: NBER ID: w24379
Authors: Dean Karlan; Adam Osman; Jonathan Zinman
Abstract: Two for-profit Philippine banks, aiming to increasing microlending to the poor, incorporated a widely used poverty measurement tool into their loan applications and tested the tool using randomized training content. Treated loan officers were provided an explanation of the tool’s purpose; exhortation tying the tool to the organizations’ social missions; and reassurance that these data, conditional on other characteristics, do not predict default and thus should not jeopardize incentive pay based on portfolio performance. The control group training merely labeled the tool “additional household information.” The strategy backfired, leading to no additional poor applicants and potentially lower-performing loans. Descriptive evidence suggests the training exacerbated loan officer misperceptions about compensation incentives and multitasking problems. This cautionary tale is an example of why management may want include social outcomes directly into employee performance evaluations, or silo corporate social responsibility efforts from core operations.
Keywords: poverty targeting; microcredit; double bottom line; corporate social responsibility; randomized control trial
JEL Codes: D12; D22; D92; G21; O12; O16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Training (M53) | Loan Officer Behavior (G51) |
| Training (M53) | Lending to Poor Households (G51) |
| Training (M53) | Average Income of Applicants (J31) |
| Training (M53) | Default Rates (E43) |
| Loan Officer Behavior (G51) | Lending to Poor Households (G51) |
| Training (M53) | Loan Performance (G51) |