Forgive us our sins – Experimental evidence on arrears forgiveness and bill payment from Nairobi, Kenya

Energy and water utilities need financial resources to maintain existing infrastructure, increase in capacity to meet growing demand, meet environmental regulations, and invest in climate resilience. Considerable attention has been paid to innovative means of financing the transition to universal access to water and sanitation services and the global transition to a clean energy future. This paper examines the foundation of utility finance – customer bill payment. We partner with Nairobi City Water and Sewerage Company to test the impact of an unconditional arrears forgiveness program on customer bill payment behavior. To our knowledge, this is the first study to experimentally test the impact of an arrears management program. We find that providing customers unconditional arrears forgiveness was not effective at improving customer bill payment and, in fact, made bill payment worse in the short run. Customers in our treatment group were less likely to make a payment towards their bill, less likely to pay their full bill on time, and accumulated more arrears over the six months following our intervention than untreated households. Our results suggest that one-off debt amnesty may inadvertently reduce compliance, and that utilities should consider conditional or alternative assistance measures.