1. Global Workshop on Development Impact Evaluation in Finance and Private Sector Rio de Janeiro, June 6-10, 2011 How do Stronger Insolvency Laws Impact Borrower Decisions? ROMANIA:

2. Policy questions  Study the impact of new out-of-court debt restructuring guidelines introduced in Romania in November 2010  The debtor and the creditor now have the option to enter into a mutually agreed upon debt restructuring, in a way that allows the debtor to continue doing business  Out-of–court restructuring is perceived as more effective than the court process because in successful cases, the dispute is settled earlier and the debt is recovered more often.  Currently, most delinquent borrowers enter insolvency

3. Policy questions  As a simpler and cheaper alternative to the courts, the main expected beneficiaries are SME’s.  Our aim is to identify: I. The causal effects of learning about the new law on SME borrower:  loan repayment rates  the size and frequency of new loan requests II. The impact of in-person training relative to other delivery mechanisms, such as mail, video, and internet.

4. Intervention  We test the interactive impact of:  Learning about the new law  The delivery mechanism of educating borrowers (lowest) Intervention Cost (highest) Mailing Video E-learning Classroom lecture

5. Future influence on policy  For WB/IFC staff & government partners:  Understanding the potential impact of insolvency reforms on financial stability, employment, and firm survival  For lenders:  Identifying a cost-effective way to inform borrowers of insolvency reforms  Reducing losses and improving profitability