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Microfinance and Prosocial Behaviors: Experimental Evidence of Public-Good Contributions in Uganda

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Microfinance is an important component of the fight against poverty. We ask whether access to microfinance loans by the poor relates to their prosocial behaviors. A lab-in-the-field study in southern, rural Uganda is done. A public-good game is used to measure subjects' willingness to free-ride. We document higher levels of contributions by those who have previously received a microloan. We explore potential explanations such as differing social-norm assessments, measurable income effects, or sample selection bias. Receiving a microloan continues to have an independent effect on prosociality. The results suggest that exposure to microfinance correlates with social preferences. (JEL: G21, O16, C93)
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Keywords: Uganda; lab in the field; microfinance; public goods; social preference

Appeared or available online: 03 May 2018

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