REPAY AS YOU EARN: LOAN REPAYMENT FREQUENCY, CASH FLOWS, AND SAVINGS OF HOUSEHOLDS
Article first published online: 8 OCT 2012
Copyright © 2012 John Wiley & Sons, Ltd.
Journal of International Development
How to Cite
Ravi, S. (2012), REPAY AS YOU EARN: LOAN REPAYMENT FREQUENCY, CASH FLOWS, AND SAVINGS OF HOUSEHOLDS. J. Int. Dev.. doi: 10.1002/jid.2884
- Article first published online: 8 OCT 2012
- Manuscript Accepted: 26 AUG 2012
- Manuscript Revised: 19 AUG 2012
- Manuscript Received: 23 MAR 2012
- repayment frequency;
- cash flows;
This paper analyses household cash management and provides evidence that a household's access to credit is directly improved by its savings. Households that are unable to save tie loan repayment to cash flows and repay as soon as money is earned. We find that income frequency increases loan repayment frequency by 32%, but this effect reduces significantly on controlling for savings. Results also show that households on average pay 3.6% higher interest on loans with repayment schedules matching household cash flows. We show this by exploiting unique ‘preferred’ loan repayment data available for each household and by using presence of marriageable-age girls in household as instrument for savings. Copyright © 2012 John Wiley & Sons, Ltd.