Table 15: Impacts on perceived benefits and costs of a double-pit toilet (combined score of six dimensions)

||(1)<br>Benefts|(2)<br>Costs - comp.1|(3)<br>Costs - comp.2|
|---|---|---|---|
|SL|0.00875|0.0536|-0.0101|
||(0.0489)|(0.0973)|(0.0436)|
|Cluster-robust p-value|[0.8580]|[0.5819]|[0.8168]|
|Romano-Wolf p-value|[0.9690]|[0.9231]|[0.9690]|
|Strata FE|Yes|Yes|Yes|
|Interviewer FE|Yes|Yes|Yes|
|Household covariates|Yes|Yes|Yes|
|Ratio sample clients/GP size|Yes|Yes|Yes|
|Control mean|10.88|6.869|-0.557|
|N|2723|2723|2723|

_Notes_ : Sample of households were asked about a twin pit toilet: 2,723 households. SL refers to sanitation loan treatment arm. Standard errors clustered at the village level shown in round parentheses. *, **, *** indicate significance at the 10, 5 and 1 percent level, referring to Romano-Wolf p-values. These are obtained from a step-down procedure to adjust for multiple hypothesis testing performing 1000 bootstrap replications (Romano & Wolf, 2005). Covariates: Toilet ownership and indicator for presence of a child aged 0 - 2 at baseline, ratio between number of sampled clients and village size; strata and interviewer fixed effects. Dimensions considered for benefit score: improved health and safety for women, household status, and happiness, increases in labor supply and time saving. Dimensions considered for cost score: toilet unhealthiness, missing time with others, getting sick more easily, spending more time fetching water, difficulty and cost of emptying the pit.

# **7 Conclusion**

This paper provides some of the first rigorous evidence on the effectiveness of micro-credit in improving the adoption of an important lumpy human capital (health) investment - a household toilet. Drawing on a cluster randomized controlled trial in rural Maharashtra, India, rich data from a primary household survey and two novel sources of administrative data on borrowing (loan-level data on lending by the partner MFI, and credit bureau reports) we show that providing joint-liability credit labelled for sanitation is an effective approach to motivate toilet construction. Two and a half years after intervention rollout, we find that the newly introduced sanitation loans were taken by around 18 percent of eligible clients, and toilet ownership, and usage of these, increased by 9 percentage points.

Through a theoretical framework and supporting statistics from our data, we show that it is not just the provision of credit that matters, but that credit attributes are important. While this is a well-established finding, the novelty of this study is to show that the label itself plays a significant role in affecting loan uptake and investment decisions of poor households. The simple theoretical framework we present, explains how loan labels can distort household borrowing and investment choices towards the labelled investment. Moreover, in the absence of a product labelled for a specific investment, a household may be discouraged from making the specific investment even if it has access to credit. The introduction of a loan earmarked for sanitation would thus allow it to make the investment. And indeed, our empirical evidencesupports this mechanism: we find that a large proportion of households that borrows from the micro-finance partner take more expensive business loans rather than the sanitation loan, even though 38