1. Using SMS Technology to Encourage Savings and Loan Repayments MABS National Round Table Conference Innovations for Poverty Action May 13 th, 2009

2. 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

3. 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

4. SMS reminders to save Timing of messages Regular (monthly) reminders Late reminders: sent to clients who made no deposit for more than 30 days Framing 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 ”

5. SMS reminders to save: Summary statistics All Opened an account Did not open an account Female67.3%80.5%63.3% Age34.07934.1734.052 Married64.1%67.5%63.1% Saved at formal institutions30.2%40.8%27.1% Attended some college44.4%55.7%41.1% Has piped water in household57.8%73.3%53.2% Income for the past 7 days1093.301508.08969.36 Does not have a cellphone55.8%33.1%62.5% Number of observations1005823147744 All variables, except age, are significantly different between those who opened the account and those who did not.

6. SMS reminders to save: Results Total savings deposit Number of clients No SMS reminder P 1721.38268 Regular text reminders Positive +2.9% 344 Negative +12.1%* 382 Late text reminders Positive +9.2%* 421 Negative +3.1% 433 Savings Deposit *Statistically significant result (Pesos)

7. SMS reminders to save: Results Proportion of clients who reached the savings goal Number of clients No SMS19.7%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

8. SMS reminders to save: Results Summary 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

9. 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

10. SMS Reminders for loan payments Participating Bank: – Rural Bank of Mabitac – Green Bank – First Valley Bank Target clients: Existing borrowers Frequency of messages: weekly

11. SMS Reminders for loan payments Framing 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

12. SMS Reminders for loan payments Results on framing Timing NumberPercent Day of payment 1 day before 2 days before No SMS reminder10931.3% Positive, client name1516195014.4% Negative, client name2417256619.0% Positive, AO name1820215917.0% Negative, AO name2419216418.4% Note: This analysis excludes 1) data from holy week, and 2) clients who have 100% late payments (i.e., never repaid on time)

13. SMS Reminders for loan payments Results on framing Proportion of late weekly payments Number of clients No SMS reminder17.7%102 Positively frame13.2%93 Negatively frame17.6%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

14. SMS Reminders for loan payments Results on personalization Proportion of late weekly payments Number of clients No SMS reminder17.7%102 Account Officer’s name12.9%*111 Client’s name18.8%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

15. SMS Reminders for loan payments Results on Timing Proportion of late weekly payments Number of clients No SMS reminder17.7%102 2 days before17.9%76 1 day before14.1%64 Day of the payment14.8%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)

16. 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