Plausibly Exogenous [1658] - Payment Schemes (08/17/2024)

LHS Variable
Demand for life insurance

RHS Variable
Payment schemes

Source of Exogenous Variation
The natural experiment emerges when branches of the microfinance institution grow too large and are split in two. The branch splits happen at an administrative level and affect back-office operations, not customers' experience: the lending process, the location and nature of meetings, membership in groups, and the nature of engagements with the bank remain unchanged.2 But customers are affected by the assignment to a new branch in one specific way: those served by the new branch are required to pay the (US$4.50) insurance premium upfront for one loan cycle/insurance coverage period.

- Bauchet and Morduch (2019), “Paying in pieces: A natural experiment on demand for life insurance under different payment schemes”