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A Personal Touch: Text Messaging for Loan Repayment

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  • 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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17952.

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Date of creation: Mar 2012
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Handle: RePEc:nbr:nberwo:17952

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  1. Jenny C. Aker & Isaac M. Mbiti, 2010. "Mobile Phones and Economic Development in Africa," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 24(3), pages 207-32, Summer.
  2. William Adams & Liran Einav & Jonathan Levin, 2007. "Liquidity Constraints and Imperfect Information in Subprime Lending," NBER Working Papers 13067, National Bureau of Economic Research, Inc.
  3. Dean Karlan & Margaret McConnell & Sendhil Mullainathan & Jonathan Zinman, 2010. "Getting to the Top of Mind: How Reminders Increase Saving," Working Papers, Economic Growth Center, Yale University 988, Economic Growth Center, Yale University.
  4. Ximena Cadena & Antoinette Schoar, 2011. "Remembering to Pay? Reminders vs. Financial Incentives for Loan Payments," NBER Working Papers 17020, National Bureau of Economic Research, Inc.
  5. Dean Karlan & Jonathan Zinman, 2005. "Observing unobservables: identifying information asymmetries with a consumer-credit field experiment," Proceedings, Federal Reserve Bank of Chicago 961, Federal Reserve Bank of Chicago.
  6. Felipe Kast & Stephan Meier & Dina Pomeranz, 2012. "Under-Savers Anonymous: Evidence on Self-Help Groups and Peer Pressure as a Savings Commitment Device," NBER Working Papers 18417, National Bureau of Economic Research, Inc.
  7. Sumit Agarwal & Brent W. Ambrose & Souphala Chomsisengphet & Chunlin Liu, 2011. "The Role of Soft Information in a Dynamic Contract Setting: Evidence from the Home Equity Credit Market," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 43(4), pages 633-655, 06.
  8. Boot, Arnoud W. A., 2000. "Relationship Banking: What Do We Know?," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 9(1), pages 7-25, January.
  9. William Jack & Tavneet Suri, 2011. "Mobile Money: The Economics of M-PESA," NBER Working Papers 16721, National Bureau of Economic Research, Inc.
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Cited by:
  1. Rekha Reddy & Miriam Bruhn & Congyan Tan, 2013. "Financial Capability in Mexico : Results from a National Survey on Financial Behaviors, Attitudes, and Knowledge," World Bank Other Operational Studies 16756, The World Bank.

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