Events

Prof. Markus Taussig
Associate Professor
Rutgers Business School

Women-owned or -led small and medium-sized enterprises (WSMEs) face more difficulties accessing credit in much of Asia than men-owned or -led SMEs. This raises questions of how to change employee behavior within lending institutions to extend credit to WSME borrowers. There is little empirical evidence on incentive effectiveness from high-stakes, field experimental settings with workers completing complex, open-ended tasks. In collaboration with a leading Vietnamese commercial bank, we evaluate the impact of two incentives for lending agents to increase recruitment of WSMEs as new borrowing clients. A total of 50 bank branches employing 550 lending staff are randomly assigned to one of the following treatments for 6 months: (i) a monthly multi-category contest; (ii) piece-rate incentives; or (iii) a control. We find that, while any treatment increases new lending by 40%, the contest, in particular, causes an increase in new WSME lending of 58%, with stronger effects among female lending agents and in urban branches. This does not induce strategic reductions in loan size, displace lending to comparable non-WSMEs, or cause lower loan quality (higher delinquency). This suggests there is room for expanded financial incentives for lending agents to extend credit to underserved groups without loss of other business.