Social Incentives in Debt Repayment

Last registered on July 09, 2019

Pre-Trial

Trial Information

General Information

Title
Social Incentives in Debt Repayment
RCT ID
AEARCTR-0004178
Initial registration date
June 25, 2019
Last updated
July 09, 2019, 3:41 PM EDT

Locations

Region

Primary Investigator

Affiliation
Purdue University

Other Primary Investigator(s)

PI Affiliation
Foreign Trade University
PI Affiliation
Indiana University

Additional Trial Information

Status
On going
Start date
2019-02-15
End date
2020-06-30
Secondary IDs
Abstract
We study social incentives in credit repayment decision of households. We partner with a retail bank in Vietnam and work with a random sample of its credit card customers. Borrowers upon application for credit provide the bank with contact information of their social connections to serve as their references. We randomly assign some customers to have the bank inform the customers' social references in case they do not repay debt on time with the purpose of encouraging their repayment. First, we test whether social concerns have an effect on incentivizing borrowers to repay their debts? Second, we examine how the effects of social concerns fare to other types of incentives such as monetary reward or credit reputation concerns? Third, we investigate which mechanisms are driving the effects: social stigma or informational role of default? Finally, we test whether social incentives can serve as a (soft) collateral, which we call social collateral. Additionally in this regard, we study to what extend social collateral can substitute physical collateral and the the implications for the borrowers with less physical assets to pledge as collateral such as the unbanked or underbanked, student loans, or the small business owners in cash economies.
External Link(s)

Registration Citation

Citation
Dang, Huong, Ha Diep-Nguyen and Jun Yang. 2019. "Social Incentives in Debt Repayment." AEA RCT Registry. July 09. https://doi.org/10.1257/rct.4178-1.0
Former Citation
Dang, Huong et al. 2019. "Social Incentives in Debt Repayment." AEA RCT Registry. July 09. https://www.socialscienceregistry.org/trials/4178/history/49587
Sponsors & Partners

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Experimental Details

Interventions

Intervention(s)
We partner with a retail bank in Vietnam and work with a random sample of its credit card customers. Borrowers upon application for credit provide the bank with contact information of their social connections to serve as their references. We randomize the offers we make to these customers with the purpose of encouraging their repayment, one of which is to have the bank inform the customers' social references in case they do not repay debt on time.
Intervention Start Date
2019-02-15
Intervention End Date
2020-04-30

Primary Outcomes

Primary Outcomes (end points)
Repayment
Primary Outcomes (explanation)
Repayment is an indicator that takes 1 if the customers make at least the minimum payment they are required to make by the deadline (10 days after the due date) and takes 0 if otherwise.

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
We partner with a retail bank in Vietnam and work with a random sample of its credit card customers. Borrowers upon application for credit provide the bank with contact information of their social connections to serve as their references. We ask the customers if they agree to let the bank inform their social references in exchange for a chance to win a lottery. Among those who agree to the arrangement, we randomize these borrowers in 2 main groups:
(1) Customers in group 1 will have the social notification arrangement offered to them and serve as the main treatment group. They will receive a text message reminding the customers that if they do not repay by the deadline (10 days after the due date), their non-repayment will be disclosed to their social contacts;
(2) Customers in group 2 will have the social notification arrangement retracted from them and be divided into 3 subgroups:
(2.1) Customers in group 2.1 serve as the main control group and receive a normal text message reminder asking for repayment that the bank regularly sends out before the deadline;
(2.2) Customers in group 2.2 serve as financial incentive benchmark group and receive a text message offering the customers a reduction in late fee and interest if they repay by the deadline.
(2.3) Customers in group 2.3 serve as credit registry benchmark group and receive a text message informing customers that if they do not repay by the deadline, their non-repayment will be reported to credit registry and stating this affect their ability to get credit since all banks consult the registry
We test whether the concerns about social image influences repayment behavior, in particular we test:
- Whether social notification increases repayment of credit card debt (group 2.1 vs. group 1)
- How the effects of social concerns fare with effects of other incentives such as financial incentive (group 2.2) and future access to credit (group 2.3)
- How the effects of social concerns change with the types of social connection.
Experimental Design Details
Randomization Method
Random assignment of social notification treatment is done by a Python program at the time the customers answer their questionaire.
Randomization Unit
The randomization is at the level of the individual customer
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
10000 borrowers
Sample size: planned number of observations
10000 borrowers
Sample size (or number of clusters) by treatment arms
Of the 10000 borrowers in the trial, we expect an acceptance rate of 70%. We randomize among these 7000 accepting borrowers as follow: 2000 social notification treatment (group 1), 2000 control with normal reminder (group 2.1), 1500 credit registry treatment (group 2.2), 1500 financial incentive treatment (group 2.3). (Final and actual sample size will vary, depending on number of accepting borrowers as well as their repayment behavior)
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB

Institutional Review Boards (IRBs)

IRB Name
Indiana University’s Institutional Review Boards
IRB Approval Date
2019-01-16
IRB Approval Number
1901335217

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
No
Data Collection Complete
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials