Applying a positive deviance approach to determine when rationally bounded borrowers derive benefit from consumer loans
Year: 2016
Type: dissertation
Abstract: The question about how consumer lending benefits or harms society is unresolved. \nSignificant strides have been made in terms of developing a rigorous methodology for \nassessing the benefits of microcredit using randomised control trials. This approach \nrules out the shortcomings of selection bias in earlier work. However, studies to date \nappear prone to anchoring bias associated with the intention of microfinance to \neradicate poverty. \nIn South Africa, the volatile socio-economic conditions (slow economic growth, high \nunemployment levels, heightened levels of labour unrest and high levels of inequality) \nemphasise the business need for studying the consumer lending market. Financial \ninclusion could play the role of aiding or harming South Africa s society. \nThis research aimed to determine in what conditions rationally bounded borrowers find \nloans beneficial using an inductive approach. A two-phased research process was \nfollowed firstly, ten semi-structured interviews were conducted with a diverse group of \nkey informants from government, industry, the media and regulators. Secondly, ten \nborrowers were interviewed and observed drawing on ethnographic research methods. \nMost of the interviews took place in the home of the respondent and where possible the \nresearcher met the other members of the household. The sample of borrowers were \npotential positive deviants individuals that derive more benefit from consumer loans \nthan their peers. \nThe research uncovered sustained tension and ideological differences between \nstakeholders that results in incoherent policy and regulation and inadequate financial \ninclusion. The landscape is characterised by low levels of savings and a heavy reliance \non loans. Borrowers in the sample were selected to participate in the research due to \nrepeat borrowing patterns, yet many expressed a desire to stop or reduce borrowing. \nThis saying-doing gap suggests that a structural and coordinated plan is needed if any \nbehaviour change is likely amongst rationally bounded borrowers. A combination of \nrestrictive regulation and positive incentives is proposed to encourage stakeholders to \ndevelop mutually beneficial strategies for achieving financial inclusion. The ability of \nstakeholders to develop coherence in this landscape will determine whether financial \ninclusion will make a positive contribution to South African society.
Author: Frances Fraser
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2501132924