Many vendors and shopkeepers in public markets in the Philippines borrow at high interest rates from moneylenders in order to operate their businesses. Yet few of these enterprises grow into more successful firms in the future. This raises the question of whether the high interest rate loans are used to invest in the growth of a business or whether they serve to do little in the long run besides push the business owner into deeper debt.

In partnership with Research Institute for Mindanao Culture (RIMCU), an IPA study uses a randomized design to evaluate three different interventions: payoff of existing moneylender debts, participation in a financial literacy class, and offer of a savings product whereby clients are enticed to deposit money in a commitment savings account.   The study includes 1,000 vendors in public marketplaces in and around the city of Cagayan de Oro and is an extension study of a similar experiment conducted in India and the Philippines in 2007.

These treatments are not mutually exclusive so this will provide us with eight different groups of vendors for whom we can study outcomes based on the interventions alone and the interaction of them. One group is a pure control group (does not receive any intervention) and others receive one intervention or a combination of interventions (treatment groups). IPA and RIMCU will conduct a baseline survey for all participants and then administer several follow-up surveys to track the progress of the participants.