Salary Delays and Overdrafts in Rural Ghana

摘要

Two common, costly forms of short-term credit are overdrafts and payday loans. Banks around the world offer overdraft services to consumers, whereby short-term credit is extended when a bank account reaches a zero balance. Payday loans are usually repaid in a single payment on the borrower's next payday, typically via a post-dated check or an authorization for the lender to debit the funds from the borrower's bank account. For users, both overdrafts and payday loans can provide needed quick and convenient access to credit. However, this convenience usually comes at the price of high interest rates or fees, relatively short loan durations, and inflexible repayment schedules.Overdraft services may be especially attractive to individuals who are supposed to receiveelectronic payments on a regular schedule, but in practice face uncertainty as to when payments arrive-a phenomenon that is common in emerging economies (e.g., among public sector workers or social protection payment recipients). While workers may value the ability to use overdrafts to meet fixed expenditure commitments like rent payments and utility bills, this means workers may also end up shouldering the cost of the employer's late payment behavior. On the other hand, individuals may be able to avoid resorting to expensive credit if they habituate to erratic payment schedules. In this paper, we use administrative data from bank accounts owned by salaried workers in Ghana to assess the extent to which payment delays cause employees to take costly overdrafts.