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A Personal Touch: Text Messaging for Loan Repayment

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  • Karlan, Dean

    (Yale University)

  • Morten, Melanie

    (Yale University)

  • Zinman, Jonathan

    (Dartmouth College)

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.

Suggested Citation

  • Karlan, Dean & Morten, Melanie & Zinman, Jonathan, 2012. "A Personal Touch: Text Messaging for Loan Repayment," Working Papers 102, Yale University, Department of Economics.
    • Handle: RePEc:ecl:yaleco:102
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    Cited by:

    1. Tesei, Andrea & Ponticelli, Jacopo & Gupta, Apoorv, 2019. "Technology Adoption and Access to Credit via Mobile Phones," CEPR Discussion Papers 13956, C.E.P.R. Discussion Papers.
    2. Tasoff, Joshua & Letzler, Robert, 2014. "Everyone believes in redemption: Nudges and overoptimism in costly task completion," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 107-122.
    3. Sule Alan & Mehmet Cemalcılar & Dean Karlan & Jonathan Zinman, 2015. "Unshrouding Effects on Demand for a Costly Add-on: Evidence from Bank Overdrafts in Turkey," NBER Working Papers 20956, National Bureau of Economic Research, Inc.
    4. Gharad Bryan & Dean Karlan & Jonathan Zinman, 2015. "Referrals: Peer Screening and Enforcement in a Consumer Credit Field Experiment," American Economic Journal: Microeconomics, American Economic Association, vol. 7(3), pages 174-204, August.
    5. Andrew Dustan & Stanislao Maldonado & Juan Manuel Hernandez-Agramonte, 2018. "Motivating bureaucrats with non-monetary incentives when state capacity is weak: Evidence from large-scale field experiments in Peru," Working Papers 136, Peruvian Economic Association.
    6. Andrew Dustan & Juan Manuel Hernandez-Agramonte & Stanislao Maldonado, 2018. "Motivating bureaucrats with non-monetary incentives when state capacity is weak: Evidence from large-scale," Natural Field Experiments 00664, The Field Experiments Website.
    7. Bogdan Genchev & Julie Holland Mortimer, 2016. "Empirical Evidence on Conditional Pricing Practices," Boston College Working Papers in Economics 908, Boston College Department of Economics.
    8. Altmann, Steffen & Traxler, Christian, 2014. "Nudges at the dentist," European Economic Review, Elsevier, vol. 72(C), pages 19-38.
    9. Cátia Batista & Marcel Fafchamps & Pedro C. Vicente, 2018. "Keep It Simple: A Field Experiment on Information Sharing in Social Networks," NBER Working Papers 24908, National Bureau of Economic Research, Inc.
    10. Szabó, Andrea & Ujhelyi, Gergely, 2015. "Reducing nonpayment for public utilities: Experimental evidence from South Africa," Journal of Development Economics, Elsevier, vol. 117(C), pages 20-31.
    11. Catherine Larochelle & Jeffrey Alwang & Elli Travis & Victor Hugo Barrera & Juan Manuel Dominguez Andrade, 2019. "Did You Really Get the Message? Using Text Reminders to Stimulate Adoption of Agricultural Technologies," Journal of Development Studies, Taylor & Francis Journals, vol. 55(4), pages 548-564, April.
    12. Hong Luo & Julie Holland Mortimer, 2017. "Copyright Enforcement: Evidence from Two Field Experiments," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 26(2), pages 499-528, June.
    13. Rekha Reddy & Miriam Bruhn & Congyan Tan, 2013. "Financial Capability in Mexico : Results from a National Survey on Financial Behaviors, Attitudes, and Knowledge [Capacidades financieras en México : resultados de la encuesta nacional sobre compor," World Bank Publications - Reports 16756, The World Bank Group.
    14. Dustan, Andrew & Hernandez-Agramonte, Juan Manuel & Maldonado, Stanislao, 2023. "Motivating bureaucrats with behavioral insights when state capacity is weak: Evidence from large-scale field experiments in Peru," Journal of Development Economics, Elsevier, vol. 160(C).
    15. Pinar Yildirim & Andrei Simonov & Maria Petrova & Ricardo Perez-Truglia, 2024. "Are Political and Charitable Giving Substitutes? Evidence from the United States," Management Science, INFORMS, vol. 70(11), pages 8030-8043, November.
    16. Emma Boswell Dean & Frank Schilbach & Heather Schofield, 2017. "Poverty and Cognitive Function," NBER Chapters, in: The Economics of Poverty Traps, pages 57-118, National Bureau of Economic Research, Inc.
    17. Sanders, Michael, 2017. "Social influences on charitable giving in the workplace," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 66(C), pages 129-136.
    18. Monica Mogollon & Daniel Ortega & Carlos Scartascini, 2021. "Who’s calling? The effect of phone calls and personal interaction on tax compliance," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(6), pages 1302-1328, December.
    19. Dean Karlan & Margaret McConnell & Sendhil Mullainathan & Jonathan Zinman, 2016. "Getting to the Top of Mind: How Reminders Increase Saving," Management Science, INFORMS, vol. 62(12), pages 3393-3411, December.
    20. Patrick Behr & Jorge Jacob, 2024. "Neighbourhood social capital, account usage and savings behaviour in low‐income countries: Field experimental evidence from Senegal," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(1), pages 84-108, January.
    21. Grote, Nora & Klausmann, Tim & Scharfbillig, Mario, 2023. "Investment in identity in the field-Nudging refugees’ integration effort," European Journal of Political Economy, Elsevier, vol. 78(C).
    22. Ziyao Huang & Yutao Yang & Chengcheng Liao & Peiyuan Du, 2022. "How to say? Voice analytics of debt collection strategies," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(4), pages 1091-1104, June.
    23. Giorgia Barboni & Juan Camilo Cárdenas & Nicolás de Roux, 2022. "Behavioral Messages and Debt Repayment," Documentos CEDE 20257, Universidad de los Andes, Facultad de Economía, CEDE.
    24. Nora Grote & Tim Klausmann & Mario Scharfbillig, 2019. "Investment in Identity in the Field - Nudging Refugees' Integration Effort," Working Papers 1905, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, revised 24 Sep 2021.
    25. Michael Sanders & Elspeth Kirkman, 2019. "I've booked you a place, good luck: A field experiment applying behavioral science to improve attendance at high impact recruitment events," Journal of Behavioral Public Administration, Center for Experimental and Behavioral Public Administration, vol. 2(1).

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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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