A Personal Touch: Text Messaging for Loan Repayment
Dean S. Karlan
Yale University; Innovations for Poverty Action; Massachusetts Institute of Technology (MIT) - Abdul Latif Jameel Poverty Action Lab; National Bureau of Economic Research (NBER)
Dartmouth College; Innovations for Poverty Action; Jameel Poverty Action Lab; National Bureau of Economic Research (NBER)
Yale University Dept. of Economics Working Paper No. 102
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.
Number of Pages in PDF File: 19
Keywords: microcredit, microfinance, randomized evaluation, development finance
JEL Classification: D21, D92, G21, O16, O17working papers series
Date posted: March 27, 2012
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