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Take Up and Impact of Digital Repayment in Microfinance
Last registered on March 15, 2019

Pre-Trial

Trial Information
General Information
Title
Take Up and Impact of Digital Repayment in Microfinance
RCT ID
AEARCTR-0004012
Initial registration date
March 14, 2019
Last updated
March 15, 2019 10:49 AM EDT
Location(s)

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Primary Investigator
Affiliation
Other Primary Investigator(s)
PI Affiliation
Additional Trial Information
Status
In development
Start date
2019-06-01
End date
2020-12-31
Secondary IDs
Abstract
Digital technology is rapidly emerging as integral to the future of development policy, and particularly to financial services. Recent years have seen rapid digitization in developing countries, from mobile money platforms to biometric smart cards. These innovations are largely perceived as beneficial, saving users on both sides of the transaction effort and time, and often enabling better monitoring. The use of mobile money to streamline payments is only becoming more commonplace. Despite this, relatively little is known about the effects of switching to mobile money. We propose to undertake a randomized control trial to evaluate the effects of digital repayment for microfinance, looking both at barriers to take-up and the effects of digital repayment on the integrity of the microfinance joint liability model.

There are two main channels through which digital repayment might negatively affect repayment behavior and default rates. First, digital repayment will result in reduced observability of loan repayments by other group members. Second, digital repayment will make meeting attendance less mandatory, which might decrease the social cohesion of microfinance groups. We assess both channels by experimentally manipulating whether microfinance clients in some groups repay digitally, and observe repayment performance, the quality of observation of the loan performance of other group members, and social interactions by group members.

We also randomly assign the selection mechanism, creating three groups: a control group that still repays with cash, an individual choice group where individual borrowers are each allowed to opt in or out of digital repayment, and a digital repayment group where all borrowers in that group are asked to repay digitally. This randomization also allows us the unique opportunity to assess the impact of digital repayment on those who would not choose it willingly, allowing insight into an important dimension of impact heterogeneity. We believe this would be the first study to identify the causal effects of digital repayment on a population which would not have chosen it, yielding crucial insight into the effects of increasing levels of digital repayment penetration.

We also experimentally test whether giving participants a receipt which explicitly confirms their payment to BRAC microfinance on a given date increases use of and confidence in the digital repayment system. This part of the experiment is designed to test whether adding a simple but costly confirmation receipt can help overcome knowledge and confidence barriers that inhibit take up of digital finance.
External Link(s)
Registration Citation
Citation
Cohen, Isabelle and Denise Ferris. 2019. "Take Up and Impact of Digital Repayment in Microfinance." AEA RCT Registry. March 15. https://doi.org/10.1257/rct.4012-1.0.
Former Citation
Cohen, Isabelle and Denise Ferris. 2019. "Take Up and Impact of Digital Repayment in Microfinance." AEA RCT Registry. March 15. https://www.socialscienceregistry.org/trials/4012/history/43385.
Experimental Details
Interventions
Intervention(s)
Our intervention is digital repayment for microfinance. Specifically, under our intervention, microfinance group members may be randomly assigned to repay their loans digitally using mobile money, rather than with cash.
Intervention Start Date
2019-06-01
Intervention End Date
2020-12-31
Primary Outcomes
Primary Outcomes (end points)
Our key outcomes of interest are initial take-up of digital finance, effects of digital repayment on business, social and health outcomes for borrowers, and effects of digital repayment on participation in microfinance.
Primary Outcomes (explanation)
Secondary Outcomes
Secondary Outcomes (end points)
Secondary Outcomes (explanation)
Experimental Design
Experimental Design
We randomly divide microfinance groups into three category to test the effects of digital repayment on microfinance: a control group that still repays with cash, an individual choice group where individual borrowers are each allowed to opt in or out of digital repayment, and a digital repayment group where all borrowers in that group are asked to repay digitally. The randomization is done at the microfinance group-level.

We also experimentally vary whether giving groups are given a receipt which explicitly confirms their payment to BRAC microfinance on a given date increases use of and confidence in the digital repayment system.
Experimental Design Details
Not available
Randomization Method
Randomization done in office by a computer
Randomization Unit
Microfinance groups
Was the treatment clustered?
Yes
Experiment Characteristics
Sample size: planned number of clusters
600 microfinance groups
Sample size: planned number of observations
12,000 microfinance clients
Sample size (or number of clusters) by treatment arms
Cross-randomized: 200 groups control, 200 groups individual choice, 200 groups digital repayment; across those, 300 groups will receive a generic receipt, and 300 will receive a BRAC-receipt
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB
INSTITUTIONAL REVIEW BOARDS (IRBs)
IRB Name
IRB Approval Date
IRB Approval Number