Charitable giving or signalling? Voluntary contributions by microcredit borrowers in Pakistan
This paper investigates charitable giving by atypical donors in an unusual setting: the donors are microfinance recipients who provide charitable contributions to their lender, a non-profit institution. The institution provides interest-free loans but encourages its borrowers to make a voluntary con...
| Main Authors: | , |
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| Format: | Journal article |
| Language: | English |
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Elsevier
2018
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| _version_ | 1826298614380494848 |
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| author | Mahmud, M Wahhaj, Z |
| author_facet | Mahmud, M Wahhaj, Z |
| author_sort | Mahmud, M |
| collection | OXFORD |
| description | This paper investigates charitable giving by atypical donors in an unusual setting: the donors are microfinance recipients who provide charitable contributions to their lender, a non-profit institution. The institution provides interest-free loans but encourages its borrowers to make a voluntary contribution of any amount with the monthly instalment for principal repayment. Analysis of these monthly voluntary contributions suggests that the institution rewards borrowers for their contributions by giving them repeat loans. In particular, borrowers on joint liability loans in poorly performing groups make larger contributions using individual contributions to override a group-level signal. We develop a theory to show that this giving behaviour is consistent with borrowers signalling their level of success with the loan, but inconsistent with other explanations, including purely altruistic motives for giving. We argue that this mechanism of signalling success can provide the basis for a potential innovation in providing financial services in the presence of informational asymmetries. |
| first_indexed | 2024-03-07T04:49:33Z |
| format | Journal article |
| id | oxford-uuid:d47de25f-fba6-4e61-bff8-1b658f78414c |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-07T04:49:33Z |
| publishDate | 2018 |
| publisher | Elsevier |
| record_format | dspace |
| spelling | oxford-uuid:d47de25f-fba6-4e61-bff8-1b658f78414c2022-03-27T08:18:53ZCharitable giving or signalling? Voluntary contributions by microcredit borrowers in PakistanJournal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:d47de25f-fba6-4e61-bff8-1b658f78414cEnglishSymplectic Elements at OxfordElsevier2018Mahmud, MWahhaj, ZThis paper investigates charitable giving by atypical donors in an unusual setting: the donors are microfinance recipients who provide charitable contributions to their lender, a non-profit institution. The institution provides interest-free loans but encourages its borrowers to make a voluntary contribution of any amount with the monthly instalment for principal repayment. Analysis of these monthly voluntary contributions suggests that the institution rewards borrowers for their contributions by giving them repeat loans. In particular, borrowers on joint liability loans in poorly performing groups make larger contributions using individual contributions to override a group-level signal. We develop a theory to show that this giving behaviour is consistent with borrowers signalling their level of success with the loan, but inconsistent with other explanations, including purely altruistic motives for giving. We argue that this mechanism of signalling success can provide the basis for a potential innovation in providing financial services in the presence of informational asymmetries. |
| spellingShingle | Mahmud, M Wahhaj, Z Charitable giving or signalling? Voluntary contributions by microcredit borrowers in Pakistan |
| title | Charitable giving or signalling? Voluntary contributions by microcredit borrowers in Pakistan |
| title_full | Charitable giving or signalling? Voluntary contributions by microcredit borrowers in Pakistan |
| title_fullStr | Charitable giving or signalling? Voluntary contributions by microcredit borrowers in Pakistan |
| title_full_unstemmed | Charitable giving or signalling? Voluntary contributions by microcredit borrowers in Pakistan |
| title_short | Charitable giving or signalling? Voluntary contributions by microcredit borrowers in Pakistan |
| title_sort | charitable giving or signalling voluntary contributions by microcredit borrowers in pakistan |
| work_keys_str_mv | AT mahmudm charitablegivingorsignallingvoluntarycontributionsbymicrocreditborrowersinpakistan AT wahhajz charitablegivingorsignallingvoluntarycontributionsbymicrocreditborrowersinpakistan |