Do the repayment requirements of the classic microfinance contract inhibit investment in high-return but illiquid business opportunities among the poor? Using a field experiment, we compare the classic contract which requires that repayment begin immediately after loan disbursement to a contract that includes a two-month grace period. The provision of a grace period increased short-run business investment and long-run profits but also default rates. The results, thus, indicate that debt contracts that require early repayment discourage illiquid risky investment and thereby limit the potential impact of microfinance on microenterprise growth and household poverty.
Disclosure laws for politicians exist in over a hundred countries. But can public disclosures about politician performance and qualifications influence electoral accountability in settings characterized by weak institutions and less educated populations? In the run-up to the 2008 elections in Delhi we implemented a field experiment where we provided slum dwellers with newspapers containing report cards giving information on candidate qualifications and legislator performance obtained under India’s disclosure laws. Access to report cards increased voter turnout; this effect is larger when incumbent performance is worse. We also observe reductions in the incidence of cash-based vote buying and electoral gains for better performing incumbents. Finally, we observe significant voter sophistication in the use of information – voters make comparisons across spending categories and candidates to overcome political agency problems and reward better performing incumbents.