The Impact of Business Training on Loan Repayment and Performance: Evidence from a Behavioral Messaging Experiment in Microfinance

The primary intervention consists of a randomized assignment to two types of text message-based invitation messages designed to encourage participation in monthly business training courses offered by a microfinance institution (MFI). Eligible clients are randomly assigned at the individual level to one of the following arms:
1. Standard Invitation Message (Control) – A conventional message format previously used by the MFI, providing course information and a registration link without any behavioral framing.
2. Behaviorally-Informed Invitation Message (Treatment) – A message incorporating behavioral science principles such as:
a. Social proof (e.g., “Clients who separate personal and business finances earn 32% more”).
b. Scarcity (e.g., “Limited spots available—sign up now!”).
Messages are tailored to the course recommended for each client based on an MFI’s diagnostic tool applied during the credit application or renewal process (the “HIN”). All messages are sent via text messages on the same day to eliminate temporal biases. Once assigned, clients consistently receive the same text message type across future invitations, even if they are invited to different courses.
The diagnostic tool provides recommendations to clients on the most suitable courses based on their identified knowledge and practice gaps. These business courses require between 2 and 12 hours to complete and target one or more of the following key areas:
1. Finances
a. How to keep accounting books (3 courses of 2, 8, and 12 hours)
b. Cash flow management (1 course of 4 hours)
c. Payroll calculation (1 course of 2 hours)
d. Effective financial management (3 courses of 3, 4, and 8 hours)
e. Cost classifications and Calculation (1 course of 2 hours)
f. Investment Projects Optimization (1 course of 4 hours)
2. Marketing and Sales
a. Neurosales (1 course of 8 hours)
b. Social Media Management (1 course of 8 hours)
c. Corporate Image (4 hours)
d. Digital Advertising (8 hours)
e. Understanding Clients (2 hours)
f. Brand Positioning (2 hours)
g. Sales Techniques (2 hours)
h. From Sale to Sale, Grow Your Business (6 hours)
i. Sell Your Value Proposition in a Few Minutes (2 hours)
j. Customer Service (4 hours)
k. Design Your Digital Media Strategy (8 hours)
l. Digital Media for Your Business (4 hours)
m. Google Tools (4 hours)
n. Optimizing WhatsApp Business (4 hours)
o. Street Vendors Workshop: “Let Yourself Be Served” – Steps to Improve Your Sales (2 hours)
p. Retail Shopkeepers Workshop: “Ask for What You Don’t See” (2 hours)
3. Business Management (8 hours)
a. Needs Identification (2 hours)
b. Time Management (2 hours)
c. ABC of Business Formalization (4 hours)
d. Inventory Management in Excel (From A to Z) (6 hours)
4. Sustainability
a. Circular Economy (4 hours)
5. Productivity
a. Boost Agricultural Productivity (2 hours)
b. Productivity: A Secret Within Everyone’s Reach (2 hours)
6. Innovation
a. Discover the Power of AI for Your Business (4 hours)
b. Artificial Intelligence and Agriculture: Discover and Apply (4 hours)


As a second layer of randomization to isolate the reciprocal role played by our MFI partner’s business training program, we conduct a second layer of random assignment among businesses in our research sample. 3 days before the loan repayment is due, the MFI sends borrowers a standard reminder message in the following form: ``Your payment is due in 3 days.''

We send this standard message to a control group. Treatment group receives a repayment reminder message in the following form: ``Your payment is due in 3 days. Remember, [MFI-NAME] is more than a lender—it’s your business partner, helping you grow through its support program.''

This treatment reminder is our core mechanism channel. It emphasizes the MFI's societal role, highlighting its contribution to enhancing business skills and thereby aiming to remind borrowers of a broader social contract or bond with the MFI—beyond the standard financial contract.

As an additional treatment, we send the following to remind the borrowers about the credit bureau implications of default and delinquency: ``Your payment is due in 3 days. Remember that keeping a good credit score is important for the future of your business.''

2025-05-22

2026-06-30

1. Training Take-up:
A binary indicator equal to 1 if the client enrolls in at least one strategic training course during the month they receive the invitation, and 0 otherwise. Course enrollment data is obtained from the MFI’s administrative training records.
2. Loan Repayment Behavior:
A set of financial indicators measured monthly from the MFI’s administrative loan portfolio data, including:
a. Delinquency: Any missed or overdue payments.
b. Arrears: Number of days past due on scheduled payments.
c. Early Repayment: Whether the client made an early repayment before the due date.
d. Number of Payments Missed: Count of missed installments in the month following invitation.

1. Business Performance:
i. Self-reported changes in business sales collected through a follow-up survey. Two questions capture perceived change in: Sales over the past three months (retrospective).
ii. Expected sales over the next three months (prospective).
2. Business Practices (via HIN Tool):
Changes in business practices will be measured using the MFI’s Needs Identification Tool (HIN), which is applied during the loan application process and repeated six months after the initial invitation. The tool collects self-reported responses across 17 business-related practices (e.g., financial management, marketing, and productivity).
3. Client Engagement:
Administrative indicators of client participation and engagement with training services, including:
i. Number of strategic courses attended during the study period.
ii. Satisfaction scores are collected through post-training surveys administered by the MFI.

This study uses a randomized encouragement design to evaluate the impact of business training on microcredit clients of a microfinance institution (MFI). Clients are randomly assigned to receive one of two types of text message-based invitation messages: a standard message or a behaviorally informed message designed using principles such as social proof and scarcity. These messages aim to encourage enrollment in monthly training courses.
Randomization occurs once per client at the time of their first invitation. Each client remains in their assigned group for the duration of the study and continues to receive the same type of message (standard or behaviorally informed) whenever they are invited to a training course.

As a second layer of randomization to isolate the reciprocal role played by our MFI partner’s business training program, we conduct a second layer of random assignment among businesses in our research sample. 3 days before the loan repayment is due, the MFI sends borrowers a standard reminder message in the following form: ``Your payment is due in 3 days.''

We send this standard message to a control group. Treatment group receives a repayment reminder message in the following form: ``Your payment is due in 3 days. Remember, [MFI-NAME] is more than a lender—it’s your business partner, helping you grow through its support program.''

This treatment reminder is our core mechanism channel. It emphasizes the MFI's societal role, highlighting its contribution to enhancing business skills and thereby aiming to remind borrowers of a broader social contract or bond with the MFI—beyond the standard financial contract.

As an additional treatment, we send the following to remind the borrowers about the credit bureau implications of default and delinquency: ``Your payment is due in 3 days. Remember that keeping a good credit score is important for the future of your business.''

Not available

Primary randomization will be conducted using a computer-based procedure in R. Each month, clients selected to receive training invitations will be randomly assigned with equal probability (50/50) to either the standard message group or the behaviorally informed message group. The procedure follows a simple random assignment without replacement and stratification. Once assigned, clients remain in the same group for the remainder of the study and receive the same type of message in future invitations.

The unit of randomization is the individual client of the microfinance institution. Each client is randomly assigned to one of the two invitation message groups at the time of their first training invitation. There is only one level of randomization in the study.

Yes

Between 1100 and 2000 clients

Between 1100 and 2000 clients in total

Primary randomization: 50% to control group and 50% to treatment group (of 1100-2000 clients)