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Does a New Informal Credit Arrangement Improve Poor’s Welfare? The Case of Debit Card Pawning in the Philippines
About the Speakers

Professor Kei Kajisa, Development Economics, School of International Politics, Economics, and Communication, Aoyama Gakuin University

Mr Ed Lucio, Data Scientist, ASB Bank Ltd, Auckland, New Zealand

About the Discussant

Dr Nina Anchugina, Deputy Director and Senior Research Fellow, Centre For Social Data Analytics (CSDA), Auckland University of Technology, New Zealand

About the Webinar

This presentation focuses on a recent example of a new credit arrangement in the Philippines’ informal finance sector: an emerging credit arrangement called “ATM sangla (pawning),” literally meaning debit card pawning. ATM sangla is an informal loan arrangement where the borrower’s ATM (debit) card is used as the collateral, where the lender uses the card to withdraw the repayment (principal and interest) from salary deposits on every payday until the entire amount is repaid. Using our unique survey data of factory workers in an industrial estate near the Metro Manila area, we find that slightly less than half (42%) of our respondents actually utilized ATM sangla at least once, with the average loan amounting to the average monthly salary. We find that roughly one-third of our respondents are present-biased discounters (myopic individuals), where they tend to hold higher loan balances with ATM sangla transactions than those whose preferences are time-consistent. Our results show that the present-biased discounters are naïve, rather than sophisticated, suggesting that the emergence of ATM sangla may have encouraged them to overborrow to finance luxury expenses. This paper is co-authored with Nobuhiko Fuwa (University of Tokyo), Eduardo Lucio (University of Queensland), Sharon Faye Piza (World Bank), and Yasuyuki Sawada (Asian Development Bank).

Dec 17, 2020 04:00 PM in Singapore

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