Microcredit Made to Measure: Experimental Evidence from Rural Morocco

By Bruno Crépon, Ralph De Haas, Tim Deisemann, Florencia Devoto and WilliamParienté

Does matching loan repayments to expected cash flows raise take-up and the welfare impact of microcredit? We test this in a randomized controlled trial with Morocco's largest microfinance institution. The experiment introduces two individual-liability products: a loan with a five-month grace period and a tailored contract with instalments matched to expected revenues. Over 3,000 applicants are randomly offered one of the new contracts or the standard loan. The products attract distinct borrowers: agricultural households take the grace-period loan, while entrepreneurs operating smaller, more capital-constrained businesses choose the tailored schedule. The tailored loan raises sales and profits through non-agricultural business expansion and labour reallocation to self-employment; the grace-period loan shows similar but insignificant effects. Neither worsens repayment, and we find no effects on investment or consumption. A second-stage information campaign across 440 villages shifts stated preferences but not take-up, consistent with supply-side frictions.