Working Paper: NBER ID: w17952
Authors: Dean Karlan; Melanie Morten; Jonathan Zinman
Abstract: We worked with two microlenders to test impacts of randomly assigned reminders for loan repayments in the "text messaging capital of the world". We do not find strong evidence that loss versus gain framing or messaging timing matter. Messages only robustly improve repayment when they include the loan officer's name. This effect holds for clients serviced by the loan officer previously but not for first-time borrowers. Taken together, the results highlight the potential and limits of communications technology for mitigating moral hazard, and suggest that personal obligation/reciprocity between borrowers and bank employees can be harnessed to help overcome market failures.
Keywords: text messaging; loan repayment; microfinance; personal obligation; reciprocity
JEL Codes: D21; D92; G21; O16; O17
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| text message reminders (L96) | loan repayment behavior (G51) |
| loan officer's name included in messages (G21) | likelihood of unpaid loans (G33) |
| personal relationships (L14) | repayment behavior (G51) |
| text message reminders (L96) | repayment effort among clients with established relationships (G51) |