The Effect of Phone-based Financial Literacy Training on Repayment in a Flexible Credit Contract

In this study, we run a field experiment in which some customers of a solar energy company will receive financial literacy training over the phone. The company that we are cooperating with sells solar home pan-els on loan using a flexible repayment schedule, allowing participants to pay any amount at any time. This allows borrowers to adjust repayments to their income stream but also requires considerable financial knowledge and planning. At the same time, such a contract requires mental resources and may therefore increase stress and reduce the feeling of control. As part of the study, participants receive a call with a short training every week for twelve weeks. Each training unit lasts about 3 to 5 minutes and covers general financial knowledge in addition to knowledge specifically related to managing the loan contract. Training units are short conversations between three people that talk about their financial situation and their re-payment of the solar panel. Participants choose the time and day of the week at which they would like to receive the call. This training is therefore particularly suited to training large numbers of people that are geographically dispersed and unable to gather in the same place. There is also a group that receives a pla-cebo training, covering technical aspects of the solar panel, and a pure control group.
We study the effect of our training on financial behaviors within the loan contract, such as repayment, as well as financial behavior outside of the loan contract, such as general savings and borrowing. In addition, we are interested in how training participation will affect feelings of financial stress, anxiety and control.
Our main RCT is complemented with a small survey experiment. In this, we examine how loan knowledge and framing of feedback on loan information will affect the likelihood that people will participate in the training.