When Commitment Fails – Evidence from an Installment Savings Product in the Philippines
Last registered on April 05, 2018


Trial Information
General Information
When Commitment Fails – Evidence from an Installment Savings Product in the Philippines
Initial registration date
April 04, 2018
Last updated
April 05, 2018 6:18 PM EDT
Primary Investigator
Other Primary Investigator(s)
Additional Trial Information
Start date
End date
Secondary IDs
Commitment products can remedy self-control problems. However, imperfect knowledge about their preferences may (discontinuously) lead individuals to select into incentive-incompatible commitments, which reduce their welfare. I conduct a field experiment where low-income individuals were randomly offered a new installment-savings commitment account. Individuals chose a personalized savings plan and a default penalty themselves. A majority appears to choose a harmful contract: While the average effect on bank savings is large, 55 percent of clients default, and incur monetary losses. A possible explanation is that the chosen penalties were too low (the commitment was too weak) to overcome clients' self-control problems. Both take-up and default are negatively correlated with measures of sophisticated hyperbolic discounting - consistent with theoretical predictions that partial sophisticates adopt weak commitments and then default, while full sophisticates are more cautious about committing, but better able to choose incentive-compatible contracts.
External Link(s)
Registration Citation
John, Anett. 2018. "When Commitment Fails – Evidence from an Installment Savings Product in the Philippines." AEA RCT Registry. April 05. https://www.socialscienceregistry.org/trials/2862/history/27694
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Experimental Details
The sample population of 913 individuals was obtained by conducting a door-to-door baseline survey in low-income areas in proximity to two selected bank branches. After a baseline survey, all individuals were provided with a marketing treatment, which included a personalized savings plan for an upcoming expenditure and a free non-commitment savings account with 100 pesos (U.S. $2.50) opening balance. Personal savings plans featured a self-chosen goal date, goal amount, and a weekly or bi-weekly installment plan. At the end of the marketing visit, a randomly chosen 50 percent (the 'Installment Savings' group) were offered a new installment-savings commitment account (`IS account'). This account committed clients to make fixed weekly or bi-weekly deposits and pay a penalty upon default, which effectively made all features of the personal savings plan binding. The default penalty was chosen by the client upon contract signing, and framed as a charity donation. The interest rate was equal to the standard market interest rate.
As a benchmark treatment, 25 percent of the sample (the `Withdrawal Restriction' group) were offered the commitment savings account studied in Ashraf et al (2006). This withdrawal-restriction account (`WR account') allowed individuals to restrict withdrawals before either the goal date or the goal amount from their savings plan had been reached. The account did not include any obligation to make further deposits after the opening balance. The remaining 25 percent of the sample received no further intervention after the marketing treatment, and constitute the control group. For the control group, none of the savings plan features were binding.
Intervention Start Date
Intervention End Date
Primary Outcomes
Primary Outcomes (end points)
Savings at the bank. Whether savings goals (expenditures for nondivisible goods) were reached. Whether goals were achieved using savings or borrowing. Predictors of commitment adoption across the two commitment products (IS vs. WR), with particular focus on time preference and sophistication measures. Predictors of default on the IS account.
Primary Outcomes (explanation)
Secondary Outcomes
Secondary Outcomes (end points)
Secondary Outcomes (explanation)
Experimental Design
Experimental Design
I designed and implemented the installment-savings commitment product in cooperation with 1st Valley Bank, based in Mindanao, Philippines. 1st Valley Bank is a small rural bank that offers microcredit, agricultural insurance, salary loans, and pension products. The bank agreed to offer both the installment-savings product and the withdrawal-restriction product in two of their branches: Gingoog and Mambajao. Gingoog is a city of 112,000 people in northern Mindanao, and Mambajao is a municipality of 36,000 people on Camiguin Island. For these two branches, the IS and the WR account constituted new product additions.

The sample was obtained through door-to-door visits in all low and middle income areas in proximity to the bank branches. In each household, the survey team identified the person in charge of managing the household budget (usually the mother of the family). The baseline survey was completed with all such individuals who (i) had some form of identification, (ii) claimed to have a large upcoming expenditure (such as school fees, house repairs, or business expansions) and (iii) agreed to receive a visit from a financial advisor (to talk about how to manage household expenses). These screening rules were intentionally minimal: 81 percent of initial respondents were included in the sample. After the baseline survey, individuals were randomly assigned to three groups: 50 percent of individuals were assigned to an 'Installment Savings' (IS) group, and 25 percent each were assigned to a 'Withdrawal Restriction' (WR) and a control (C) group. Participants were not aware that they are taking part in an experiment.

Approximately one week after the baseline survey, individuals received a visit from a bank marketer. Marketers engaged individuals in a conversation about how to manage large lump-sum expenses, and talked about the benefits of saving. Focusing on one particular expenditure, individuals were encouraged to make a formal 'Personal Savings Plan', which contained a purpose, a goal amount, a goal date, and a fixed equal installment plan with due dates. The median savings goal was 2400 pesos (close to the median household's weekly income of 2125 pesos), with a median weekly installment of 150 pesos. Common savings goals were school tuition fees, house repairs, and Christmas gifts. The duration of savings plans was limited to 3–6 months (median: 137 days). In addition, everyone was offered a non-commitment savings account (henceforth called 'ordinary savings account'), containing a free 100 pesos opening balance as a 'welcome gift', along with an encouragement to use this account to save for the expenditure.

At the end of the visit, individuals in group IS were asked whether they wanted to commit to the fixed-installment structure outlined in their Personal Savings Plan by taking up the IS product, and the product features were explained. In contrast, individuals in group WR were offered to restrict withdrawals of their savings until they reached either the goal amount or the goal date specified in their Personal Savings Plan, implemented through the WR product. Clients were permitted to revise their savings goals upon accepting a commitment product. Up to the point of offering the commitment products, the marketing script was identical across groups IS, WR, and C. In group IS, 114 clients (out of 423 offered) accepted the IS product. In group WR, 92 (out of 219 offered) accepted the WR product.

The installment-savings product committed clients to a fixed installment plan with weekly (84 percent) or bi-weekly (16 percent) due dates. An account was considered in default from the day the client fell three installments behind. In case of default, the account was closed, an 'Early Termination Fee' was charged, and any remaining savings were returned to the client. A termination fee that is directly linked to the installment structure distinguishes the IS product from withdrawal-restriction or ordinary accounts, and represents its key commitment feature. The amount of the fee was chosen by the client upon signing the IS contract, and donated to charity in case of default. Clients were given a choice of three national (but not local) Philippine charities. A variety of flexibility features allowed clients to adapt to changing circumstances: First, clients could fall up to two installments behind at any given time, making it theoretically possible to miss every other installment, and pay a double installment in alternate weeks. To encourage timely depositing, a small 10 peso ($0.25) admin fee had to be paid upon making up a missed past installment, but this fee did not accumulate over time. Deposits towards future weeks could be made at any time, as long as they were in increments of the weekly installment. This was a practical requirement, as the client's progress was monitored by making ticks on a collection card for each successful week. The possibility of making future deposits early effectively provided a form of insurance against uneven income streams. Withdrawals during the savings period were only possible by allowing default to occur.

Enforceability of the termination fee was facilitated through the account opening balance: To complete the opening of an IS account, clients had to deposit an opening balance equal to their first weekly installment, but at least 150 pesos (250 pesos) for savings goals below (above) 2500 pesos. Using the same threshold, clients could choose a termination fee as high as they liked, but no lower than a minimum of 150 pesos (250 pesos). Consequently, the minimum termination fee (chosen by 80 percent of clients) could always be enforced. Termination fees above the minimum could be enforced only if the client continued to save, or if their opening balance exceeded the minimum. By construction, all IS accounts were either successfully completed or in default by the goal date, and any remaining savings were transferred to clients' ordinary savings accounts.

The withdrawal-restriction account was simpler in structure: Clients chose to restrict withdrawals before a specified goal was reached. Out of 92 WR clients, 39 chose a goal amount, and 53 chose a goal date. The goal amount can be interpreted as the stronger restriction, since additional deposits need to be made in order to receive savings back. There was no time limit for reaching the goal amount. However, as is common for Philippine banks, significant dormancy fees were applied after two years of inactivity. The minimum opening balance for the WR account was 100 pesos. For both IS and WR, opening balances were collected one week after contract signing. The practical motivation was to give individuals time to prepare for the expense. The theoretical motivation was to free the decisionmaker from temptation in the contract-signing period – a sophisticated hyperbolic discounter should choose a welfare-maximising contract when asked in period 0, but not necessarily when asked in period 1. Finally, both products shared the same emergency provisions: In case of a medical emergency or death in the family, a relocation to an area not served by the bank, or a natural disaster, clients could close their account and access their savings without any penalties. Within the six months of observation, no client exercised this option.

Individuals were left to themselves during the savings period, without help from deposit collectors or reminders. After all goal dates had been reached, a comprehensive endline survey asked about savings, outstanding loans, expenditures, changes in income, and various types of shocks experienced. In addition, existing IS clients were offered to 'pre-order' IS for a second round, and told that the bank would continue the product conditional on sufficient demand. While the Pre-Order did not involve a financial commitment, it required the completion of substantial paperwork and a new savings plan (to deter cheap talk).
Experimental Design Details
Randomization Method
For the main treatment, randomization was done in office by a computer. The randomization was stratified on age, gender, the receipt of real rewards in the time preference elicitation, present bias (obtained from MPL elicitation), an indicator for facing strong financial claims from others, and an indicator for being a cyclical borrower.
A second randomization determined which half of the sample were asked time preference questions with real monetary rewards during the baseline survey (for the other half the questions were hypothetical). At the start of the baseline survey, enumerators verified respondents' ID as a part of the screening process. Enumerators then performed a calculation based on an individual's birth day, month and year. If the calculated number was odd, the respondent received a survey containing questions with real rewards. This fact was known before starting the survey. For those with real rewards, one randomly selected question was paid out, using draws of numbered ping pong balls from a bag.
Randomization Unit
Was the treatment clustered?
Experiment Characteristics
Sample size: planned number of clusters
913 individuals
Sample size: planned number of observations
913 individuals
Sample size (or number of clusters) by treatment arms
457 in Installment Savings (IS) arm
228 in Withdrawal-Restriction (WR) arm
228 in Control arm (which also received the marketing treatment)
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB Name
IRB Approval Date
IRB Approval Number
Post Trial Information
Study Withdrawal
Is the intervention completed?
Intervention Completion Date
April 13, 2013, 12:00 AM +00:00
Is data collection complete?
Data Collection Completion Date
May 30, 2013, 12:00 AM +00:00
Final Sample Size: Number of Clusters (Unit of Randomization)
913 individuals
Was attrition correlated with treatment status?
Final Sample Size: Total Number of Observations
913 individuals
Final Sample Size (or Number of Clusters) by Treatment Arms
Data Publication
Data Publication
Is public data available?
Program Files
Program Files
Reports and Papers
Preliminary Reports
Relevant Papers