This week, as part of the Brown Bag series in collaboration with the Chaudhry Nazar Muhammad Department of Economics at LUMS, we were joined by Dr. Russell Toth, an Associate Professor in the School of Economics at the University of Sydney, Australia.

Dr. Toth is a development microeconomist, with primary research interests in the development of the private sector – particularly development finance and firms – and occasional overlap with agricultural, behavioral, and environmental economics. His research often involves primary data collection and field experiments, with ongoing work on countries including Fiji, India, Pakistan, the Philippines, Tanzania, and Vietnam. He holds a Ph.D. in economics from Cornell University.

Dr. Toth discussed his work, titled Incentivizing Lending to Women Entrepreneurs: Evidence from Vietnam. Women-owned or -led small and medium-sized enterprises (WSMEs) face more difficulties accessing credit in much of Asia than male-owned or -led SMEs. This raises the question of how to change employee behavior within lending institutions to extend credit to WSME borrowers. There is little empirical evidence on incentive effectiveness from high-stakes, field experimental settings with workers completing complex, open-ended tasks.

In collaboration with a leading Vietnamese commercial bank, Dr. Toth and his colleagues evaluated the impact of two incentives for loan officers to increase recruitment of WSMEs as new borrowing clients.

They found that while any treatment increased new WSME lending by 40%, the contest in particular caused an increase in new WSME lending of 58%, with stronger effects in urban branches and among female officers. This did not induce strategic reductions in loan size, displace lending to comparable non-WSMEs, or cause lower loan quality (higher delinquency). This suggested that there was room for expanded financial incentives for loan officers to extend credit to underserved groups without loss of other business.