Cost Efficiency in Microfinance Loan Recovery: Can a Simple Message Be Effective?

Last registered on January 13, 2026
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Pre-Trial

Trial Information

General Information

Title
Cost Efficiency in Microfinance Loan Recovery: Can a Simple Message Be Effective?
RCT ID
AEARCTR-0016354
Initial registration date
October 06, 2025

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
October 06, 2025, 3:34 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Last updated
January 13, 2026, 2:38 PM EST

Last updated is the most recent time when changes to the trial's registration were published.

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Primary Investigator

Name
M. Emranul Haque
Affiliation
The University of Manchester
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Other Primary Investigator(s)

PI Name
Indranil Dutta
PI Affiliation
The University of Manchester
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PI Name
Subhasish Chowdhury
PI Affiliation
University of Sheffield
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Additional Trial Information

Status
In development
Start date
2025-11-01
End date
2027-07-31
Keywords
Behavior, Finance & Microfinance, Firms & Productivity, Welfare
Additional Keywords
JEL code(s)
C93, D0, D24, G21, I40
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
Microfinance institutions (MFIs) serve as a crucial financial bridge for underserved populations, particularly in developing nations where traditional banking services are inaccessible. However, these institutions often face significant operational challenges, including the high costs associated with administering and recovering small loans. Intensive borrower monitoring, frequent field visits, and default risks contribute to higher interest rates and operational costs, making borrowing increasingly expensive for low-income individuals. This research aims to address the challenges of high operational costs by proposing a behavioural experiment that utilises faith-based nudges to enhance cost efficiency. This approach enables MFIs to lower interest rates or Islamic MFIs to reduce their mark-ups for borrowers over time. The findings will contribute not only to the sustainability and inclusiveness of microfinance practices but also to global efforts in combating poverty and reducing inequality.
External Link(s)

Registration Citation

Citation
Chowdhury, Subhasish, Indranil Dutta and M. Emranul Haque. 2026. "Cost Efficiency in Microfinance Loan Recovery: Can a Simple Message Be Effective?." AEA RCT Registry. January 13. https://doi.org/10.1257/rct.16354-2.0
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Experimental Details

Interventions

Intervention(s)
Our intervention is mainly to assess the efficacy of messages on overall loan management efficiency. We study the micro finance institutions in a developing country set up to assess the impact of this intervention.
Intervention Start Date
2026-03-01
Intervention End Date
2026-05-31

Primary Outcomes

Primary Outcomes (end points)
(i) Late repayments, (ii) Default rate with each group, (iii) Attendance of participants in weekly group meetings, (iv) Monitoring costs on loan recovery in each Branch.
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
(i) Assets of borrowers, (ii) Household income; (iii) Self reported Wellbeing of borrowers
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
Our experimental set up is in a large microfinance institution in a developing country. We randomly select members of the MFI into treatment and control groups. Our experimental design ensures that there is no possibility of spill over effects between treatment and control groups, as well as ensuring that there is some homogeneity within these groups.
Experimental Design Details
Not available
Randomization Method
We randomly allocate six branches into treatment and control groups based on computer based randomisation and coin flip. Using computer based randomisation, we select 50 centres from each of the six branches.
Randomization Unit
We use a two-step randomisation process. In the first step, the units of randomisation are the branches, where we allocate six branches to control and treatment groups. In the second step, the units of randomisation are the centres within each branch.
Was the treatment clustered?
Yes

Experiment Characteristics

Sample size: planned number of clusters
We consider each Centre as a cluster since all groups in that centre will be either in the control or treatment categories.
In total we have 300 Centres.
Sample size: planned number of observations
For most centres, there are 8 groups consisting of 5 members each. Since this is a micro-finance institution, our primary focus will be on peer lending groups. In total our study will cover around 2400 groups.
Sample size (or number of clusters) by treatment arms
Our treatment arms with nudges will have a total of 300 centres, with around 2400 groups and 12000 individuals.
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
University Research Ethics Committee (UREC), The University of Manchester
IRB Approval Date
2025-08-15
IRB Approval Number
2025-23843-43324
Analysis Plan