Paying for urban services: utility bills, prepaid metering and spending patterns of the poor

Revenue recovery is a challenge for urban service providers in developing countries. Poor customers often struggle to pay monthly bills and providers face both high costs and political economy barriers to enforcing payment. Prepayment is an increasingly popular solution to this problem in the electricity and water sectors. In our study setting, low income households purchase prepaid electricity every 3 days, on average, and use 12 percent less electricity than when they are billed monthly. We will investigate the preferences and constraints that give rise to these spending and consumption patterns on prepaid metering and is organized around two core questions:
a) Is the reduction in consumption associated with prepaid metering a choice by the household, or is it driven by constraints such as liquidity constraints and higher transaction costs?
b) Do high frequency purchasing patterns indicate demand for self-control, cash-on-hand liquidity constraints, or demand for savings?
Our findings will both shed light on factors that contribute to current high rates of payment delinquency on monthly billing and will inform the design of interventions to improve revenue recovery for urban services while simultaneously meeting the needs of low income households.