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Evaluating the Effectiveness of Radio and Video as means for Financial Education among Low-Income Households in Cusco, Peru
Last registered on July 26, 2016

Pre-Trial

Trial Information
General Information
Title
Evaluating the Effectiveness of Radio and Video as means for Financial Education among Low-Income Households in Cusco, Peru
RCT ID
AEARCTR-0001221
Initial registration date
July 26, 2016
Last updated
July 26, 2016 3:02 PM EDT
Location(s)
Region
Region
Primary Investigator
Affiliation
Northwestern University
Other Primary Investigator(s)
PI Affiliation
Georgia State University
PI Affiliation
Dartmouth College, IPA, J-PAL
PI Affiliation
Grupo de Analisis para el Desarrollo (GRADE)
Additional Trial Information
Status
Withdrawn
Start date
2009-04-01
End date
2010-07-31
Secondary IDs
Abstract
Microcredit is often offered in conjunction with financial education services to train clients through pre-existing infrastructure. In Peru, we attempted to evaluate the impact of a technology-based financial literacy program on microcredit clients’ financial behavior. Low implementation levels led to a discontinuation of the evaluation.

However, a sub-sample of the trial was used to study another outcome linked to financial services and loan use. Policymakers and microfinance institutions (MFIs) often claim to target poor entrepreneurs who then invest loan proceeds in their businesses. Typically in non-research settings these claims are assessed using readily available but unverified self-reports from client loan applications. Alternatively, independent surveyors could directly elicit how borrowers spent their loan proceeds. That too, however, could suffer from deliberate misreporting. We use data from the Peru trial and another trial in the Philippines in which independent surveyors elicited loan use both directly (i.e., by asking how individuals spent their loan proceeds) and indirectly (i.e., through a list-randomization technique that allows individuals to hide their answer from the surveyor). We find that direct elicitation under-reports the non-enterprise uses of loan proceeds.
Registration Citation
Citation
Chong, Alberto et al. 2016. "Evaluating the Effectiveness of Radio and Video as means for Financial Education among Low-Income Households in Cusco, Peru." AEA RCT Registry. July 26. https://doi.org/10.1257/rct.1221-1.0.
Former Citation
Chong, Alberto et al. 2016. "Evaluating the Effectiveness of Radio and Video as means for Financial Education among Low-Income Households in Cusco, Peru." AEA RCT Registry. July 26. https://www.socialscienceregistry.org/trials/1221/history/9700.
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Experimental Details
Interventions
Intervention(s)
Arariwa is a NGO based in Cusco, Peru which serves much of Northern Peru. Arariwa offers livelihood trainings, technical skill development, and microfinance products to clients in these areas. To offer microfinance, Arariwa establishes communal banks that participate in group savings, loans, and educational programs. In an effort to improve client success, Arariwa is utilizing its existing infrastructure to provide financial education. A total of 666 communal banks were randomly assigned to a treatment group, which received a financial education module, or a comparison group which received education on other topics such as health and self-esteem. The financial literacy program consisted of nine monthly training sessions that used both video and radio components to convey lessons. The sessions, provided during monthly bank meetings, were based off a curriculum adapted from Freedom from Hunger's (FFH) training modules, and also used short videos (5-7 minutes in length), activities, and moments of reflection to reinforce key concepts. Training sessions lasted 45 minutes and covered the following topics: creating financial goals and savings plans, investing in business, calculating loan payments, and avoiding default. After meetings, participants were asked to listen to a 25-minute radio program to reinforce the training content and to complete a set of homework questions. The radio program was broadcast four times a month and presented testimonies from successful Arariwa clients. Due to low implementation levels, the evaluation had to be discontinued.

However, we used a sub-sample of the Peruvian sample based on the information collected through the baseline survey to evaluate loan use reporting. In this first mini-study, we compare borrower reports of loan uses from two different elicitation methods implemented by surveyors: direct questioning versus list randomization. In our second mini-study, clients at three banks in the Philippines were subjected to two questions at four different times during their loan cycle. The questions aimed to get at the truth behind two statements: (1) “I used 2500 pesos or more of my loan to pay down other debt” and (2) “I used 5000 pesos or more of my loan on any single transaction for my household”. Respondents were asked to consider the statements with regard to their most recent loan. First, credit officers presented the questions to clients on their loan application. Credit officers then presented the questions again when clients went to make their first loan repayment. These two instances allow us to see how answers change before and after the loan was granted. Two weeks after loan disbursal, surveyors return to the clients to ask a set of questions either directly or using list randomization.
Intervention Start Date
2009-04-01
Intervention End Date
2010-07-31
Primary Outcomes
Primary Outcomes (end points)
Financial education-related portion of the trial (withdrawn):
- Financial behaviour of microcredit clients
Loan use-related portion of the trial (successfully implemented):
- Loan use
- Reporting rate of using loans for enterprise investments
- Reporting rate of using loans for other investments (such as consumption)
Primary Outcomes (explanation)
Secondary Outcomes
Secondary Outcomes (end points)
Secondary Outcomes (explanation)
Experimental Design
Experimental Design
As part of the list randomization technique, half of the survey respondents are randomly selected to receive a short list of statements (in our case a list of business investments) and asked to report how many, but not which, statements are true. The other half of the survey respondents are presented with the same list of statements and one key additional statement designed to capture sensitive behavior (in our case non-business investment or a type of consumption). By subtracting the mean number of true statements in the first group from the mean number of true statements in the second group, researchers can estimate the proportion of the sample that engages in the sensitive behaviour.

Prior to evaluating the use of video and radio as a means for financial education, 1650 MFI clients were surveyed in Cuzco, Peru. The lending institution, Arariwa, provides microcredit for business purposes to approximately 20,000 low-income households in southeastern Peru. Arariwa emphasizes that loans should be used for business, and requires the borrower to state what the loan will be used for when they apply. However, there is no policy of explicitly monitoring the use of the cash proceeds from loan disbursal. As part of the baseline survey, Arariwa clients were asked questions related to their personal finances and education. Surveyors were not affiliated with any MFI and informed survey respondents that their responses would not be shared with anyone other than researchers studying how entrepreneurs that are Arariwa clients manage their household finances. All respondents were asked to report their loan uses through direct report and list randomization techniques. For the direct report, respondents were asked to list up to five loans that they had taken out in the past 12 months, by loan source and amount. They were then asked, “Which need or which needs did you cover with this loan?” and allowed to list up to three uses for each loan. Though respondents were not prompted with categories, surveyors matched uses against one of 18 possibilities.

Starting the list randomization, clients were randomly selected to be presented with one of four possible groups of three to six statements. The randomization was stratified by lending group. A subset of clients were randomly selected to be surveyed, and if an individual was not found then there was a replacement list, randomly ordered, of individuals to survey. Any replacement individual was assigned to the same list randomization treatment as the original target respondent. All clients received the following three statements: “I used part of my Arariwa loan to buy merchandise for my economic activity”, “I used part of my Arariwa loan to buy equipment for my economic activity” and “I shared my loan with another person”. Clients in group A (n=408) only received these statements. Clients in group B (n=414) additionally received the following statement: “I used at least a quarter of my Arariwa loan on household items, such as food, a TV, a radio, etc.” Group C (n=388) received the four previous statements, and the statement, “I used at least a quarter of my Arariwa loan to pay for my family's medical expenses.” Group D (n=401) received the previous five statements and the statement, “I used at least a quarter of my Arariwa loan to pay for my family's educational expenses.” By subtracting the mean number of true statements for group A from the mean number of true statements for group B, we get the proportion of clients that used a quarter of their loan for household items. We similarly subtract B from C and C from D to get the proportions of clients using their loans on education or medical expenses. In order to compare estimates, we match the loan uses from direct report to those from list randomization. Since the direct report question allows clients to list up to five loans from any source, we limit the sample to only include Arariwa loans or communal loans facilitated by Arariwa. Due to cultural norms and surveyor training, “household items” is best approximated by the direct report responses that are classified as “consumption good”, “purchase clothing or shoes”, and “other consumption need.”

After the first two rounds of direct questioning of the clients – once before loan disbursal and once after the first repayment, surveyors then visited clients, on average, two weeks after the client was granted a loan from one of the participating banks. The surveyor asked them to participate in a survey about “Health and Financial Services.” Respondents had no reason to believe that the surveyors had any connection to the bank. The first few questions asked about health attitudes and behaviors so that clients would not think that the surveys were coming directly from the bank. Surveyors had no information about the three participating banks. Surveyors then asked the clients the two questions explicitly. The difference between the responses during the first repayment and the explicit questions from the surveyor allows us to see how responses change when clients think the bank may be monitoring their answers. At that time, surveyors also presented the questions indirectly using list randomization.

Clients were asked two sets of list randomization questions. These questions allowed us to estimate the proportion of true answers to the two statements. Each client randomly received one of four surveys. All surveys contained the following four statements in the first question: “I have visited a hospital or clinic in the last six months,” “I have more than three siblings,” “I have purchased some type of insurance in the past five years,” and “My household owns an air conditioner.” The second and fourth surveys had “I used 2500 pesos or more of my loan to pay down other debt” as the fifth question. Similarly the second set of list randomization questions included the following four statements on all surveys: “I have a washing machine in my home,” “I am originally from this city,” “I have completed one year or more of formal education post-high school,” and “My household owns a computer.” The third and fourth surveys also include the statement “I used 5000 pesos or more of my loan on any single transaction for my household.” In this case, the questions used in list randomization were exactly the same as those used in direct elicitation, so any differences in results can be attributed purely to the method and not the content of the question. Survey one was administered to 58 people in our sample, survey two was administered to 77 people, survey three was administered to 59 people and the final survey was administered to 66 people. Comparing results from the explicit question by the surveyor to results from the list randomization will demonstrate how responses change when clients believe their answers are truly private, even from the surveyor.
Experimental Design Details
Randomization Method
randomization done in office by a computer
Randomization Unit
Bank-level randomization
Was the treatment clustered?
Yes
Experiment Characteristics
Sample size: planned number of clusters
666 communal banks
Sample size: planned number of observations
Peru sample: 1,650 clients; Philippines sample: 4,128 clients
Sample size (or number of clusters) by treatment arms
Peru - list randomization groups:
1) group A (received 3 statements): 408 clients,
2) group B (received 4 statements): 414 clients,
3) group C (received 5 statements): 388 clients,
4) group D (received 6 statements): 401 clients;

Philippines:
1) group 1 (Spent more than 2500 PHP to pay down other debt): 2,061 clients
2) group 2 (Spent more than 5000 PHP on a single HH transaction): 2,067 clients
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB
INSTITUTIONAL REVIEW BOARDS (IRBs)
IRB Name
IRB Approval Date
IRB Approval Number
Post-Trial
Post Trial Information
Study Withdrawal

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Intervention
Is the intervention completed?
Yes
Intervention Completion Date
July 31, 2010, 12:00 AM +00:00
Is data collection complete?
No
Data Publication
Data Publication
Is public data available?
No
Program Files
Program Files
Reports and Papers
Preliminary Reports
Relevant Papers
Abstract
Policymakers and microfinance institutions (MFIs) often claim to target poor entrepreneurs who then invest loan proceeds in their businesses. Typically in non-research settings these claims are assessed using readily available but unverified self-reports from client loan applications. Alternatively, independent surveyors could directly elicit how borrowers spent their loan proceeds. That too, however, could suffer from deliberate misreporting. We use data from the Peru and the Philippines in which independent surveyors elicited loan use both directly (i.e., by asking how individuals spent their loan proceeds) and indirectly (i.e., through a list-randomization technique that allows individuals to hide their answer from the surveyor). We find that direct elicitation under-reports the non-enterprise uses of loan proceeds.
Citation
Karlan, Dean S., and Jonathan Zinman. 2012. "List Randomization for Sensitive Behavior: An Application for Measuring Use of Loan Proceeds." Journal of Development Economics 98(1): 71-75.