| Author(s) |
Britta Augsburg, Bet Caeyers, Sara Giunti, & Bansi Malde |
| Date |
2018-10-25 |
| Country |
India |
| Description |
In this paper, we draw on a cluster randomized controlled trial of a sanitation loan program to study whether sanitation microcredit can boost the adoption of household toilets in rural India. The paper is structured as follows. Section 2 describes the context of the study and the sanitation loan product. Section 3 discusses the experimental design, followed by the empirical strategy in Section 4 and a presentation of our key impact estimates in Section 5. Section 6 presents the exposition of a simple theoretical model which forms the basis for our analysis of driving mechanisms behind the key findings. The section provides empirical support for the model's predictions. We conclude the paper in Section 7. |
| Abstract |
Credit constraints are considered to be an important driver of low adoption of preventive health investments among low-income households in developing countries. However, it is not obvious whether, and the extent to which, the provision of micro-credit for such investments will boost human capital investments, particularity when it is not bundled with the investment, and is characterized by other attractive attributes. We study a sanitation microloan program in rural India, which provided microfinance loans for sanitation that were not bundled with a specific sanitation investment. Using a cluster randomized controlled trial, we provide evidence that the loan program was effective in increasing sanitation ownership. A simple theoretical framework indicates that these impacts could have been achieved through three channels - relaxation of credit constraints, salience of the loan label, or a lower interest rate for the sanitation loan. Empirically, we find that the sanitation investment is not accompanied by an increase in household borrowing, ruling out the credit constraints channel. Credit based interventions are thus a viable strategy to improve uptake of lumpy preventive health investments, though there is significant room for improvement in the design of such interventions. |
| Table of contents |
1. Introduction
2. Context and Intervention
3. The Experiment
4. Empirical Model
5. Results
6. Channels
7. Conclusion |
| Download |
https://microdata.worldbank.org/index.php/catalog/6113/download/70337 |
