Texting to nudge loan repayment

Salience Bias and Financial Products
Intervention Financial Products

Can text reminders lead to better loan repayments?

Intervention Description

Behavioral nudges to encourage loan repayment is an important topic of research, especially in the developing world. One study in Uganda contrasted monetary rewards encouraging repayment with text messages. Researchers examined loan repayment in one group where participants were offered a 25% decrease in their interest rate; another group was sent a reminder text message each month before their loan payment was to be paid. The text messages resulted in approximately the rate of repayment as the monetary incentives.