Using SMS Technology to Encourage Savings and Loan Repayments

MABS National Round Table ConferenceInnovations for Poverty Action

May 13th, 2009

SMS reminders to save

Motivation• Small, frequent deposits make it easy for low-income

households to accumulate savings;• But they currently don’t have a habit of saving with

banks;• In a previous study, we found that a large number of

clients in a savings program forgot that they had savings accounts

Reminders may help them to make more frequent deposits

SMS reminders to save

• Participating Bank: First Valley Bank• Target clients: New micro-savers• Savings product: Gihandom “Dream” Savings

– Clients choose their own savings goal amounts and goal dates

– Clients get “lock boxes” to help them make daily deposits

SMS reminders to saveTiming of messages• Regular (monthly) reminders• Late reminders: sent to clients who made no deposit

for more than 30 daysFraming of messages• Positively framed: highlighting the benefits of saving

“Frequent deposit into the Gihandom Savings account will make your dream come true. A reminder from 1st Valley Bank”

• Negatively framed: highlighting the downsides of failing to save. “If you don't frequently deposit into the Gihandom Savings account, your dream will not come true. A reminder from 1st Valley Bank ”

SMS reminders to save: Summary statistics

AllOpened an

accountDid not open an

account

Female 67.3% 80.5% 63.3%

Age 34.079 34.17 34.052

Married 64.1% 67.5% 63.1%

Saved at formal institutions 30.2% 40.8% 27.1%

Attended some college 44.4% 55.7% 41.1%

Has piped water in household 57.8% 73.3% 53.2%

Income for the past 7 days 1093.30 1508.08 969.36

Does not have a cellphone 55.8% 33.1% 62.5%Number of observations 10058 2314 7744

All variables, except age, are significantly different between those who opened the account and those who did not.

SMS reminders to save: ResultsTotal savings

depositNumber of

clients

No SMS reminder

P 1721.38 268

Regular text remindersPositive +2.9% 344

Negative +12.1%* 382 Late text reminders

Positive +9.2%* 421

Negative +3.1% 433

Savings Deposit

*Statistically significant result

(Pesos)

SMS reminders to save: Results

Proportion of clients who reached the

savings goal

Number of

clients

No SMS 19.7% 268

Regular text reminders

Positive +1.2% 344

Negative +7.6%* 382

Late text reminders

Positive +7.6%* 421

Negative +2.1% 433

Proportion of clients who reached the savings goals

*Statistically significant result

SMS reminders to save: ResultsSummary• 2,314 new savings clients• Over 4.5 million pesos of deposit generated• Negatively framed messages are more effective for regular

reminders• Positively framed messages are more effective for

reminders for dormant accounts• The impact is greater among

– Female – Wealthy (index calculated with income, water source, house

ownership, house materials, etc.)– Clients who have saved previously at formal financial institutions

SMS Reminders for Loan Payments

Motivation• Costly for the account officers to visit clients

many times to collect/remind them to repay• Clients may not be good at planning and saving

to make loan payments• Simple reminders could help them put aside

money for loan payments

SMS Reminders for loan payments

• Participating Bank: – Rural Bank of Mabitac– Green Bank– First Valley Bank

• Target clients: Existing borrowers• Frequency of messages: weekly

SMS Reminders for loan paymentsFraming of messages• Positive message (“to have good standing")• negative message (“to avoid penalty")Personalization of messages• Client's name • AO's name Timing of the text messages• 2 days before the weekly payment• 1 day before the weekly payment• Day of weekly payment

SMS Reminders for loan paymentsResults on framing

Timing

Number PercentDay of

payment1 day

before2 days before

No SMS reminder 109 31.3%

Positive, client name 15 16 19 50 14.4%

Negative, client name 24 17 25 66 19.0%

Positive, AO name 18 20 21 59 17.0%Negative, AO name 24 19 21 64 18.4%

Note: This analysis excludes 1) data from holy week, and 2) clients who have 100% late payments (i.e., never repaid on time)

SMS Reminders for loan paymentsResults on framing

Proportion of late weekly payments

Number of clients

No SMS reminder 17.7% 102Positively frame 13.2% 93Negatively frame 17.6% 118

Summary• Clients who receive positively framed messages have lower

proportion of late weekly payments• The effect is not statistically significant (i.e., non-conclusive),

and a longer observation may provide us more concrete results

SMS Reminders for loan paymentsResults on personalization

Proportion of late weekly payments

Number of clients

No SMS reminder 17.7% 102Account Officer’s name 12.9%* 111Client’s name 18.8% 100

Summary• Clients who receive messages with AO’s name have a

lower proportion of late weekly payments by 4.8 percentage points;

• The Effect is statistically significant;

*Statistically Significant

SMS Reminders for loan paymentsResults on Timing

Proportion of late weekly payments

Number of clients

No SMS reminder 17.7% 1022 days before 17.9% 761 day before 14.1% 64Day of the payment 14.8% 71

Summary• No effect found on messages sent 2 days before payment due;• Clients who receive reminders 1 day before, or the day of the

payment have lower rate of late payments• The effect is not statistically significant (a longer observation is

needed)

Summary• Sending text messages is an easy way to

– remind clients to save/make loan payments– help clients form a habit of saving/making loan payments

• But need to put some thoughts into what messages to send– Negatively framed regular messages are more effective in

encouraging clients to save;– Positively framed messages seem to reduce late payments– Personalizing the messages with AO’s name reduces late

payments– Reminding clients about the payment too far in advance

(2 days before) doesn’t seem to reduce the late payments