Moral Incentives in Credit Card Debt Repayment: Evidence from a Field Experiment
42 Pages Posted: 30 Aug 2018
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Moral Incentives in Credit Card Debt Repayment: Evidence from a Field Experiment
Moral Incentives in Credit Card Debt Repayment: Evidence from a Field Experiment
Date Written: March 1, 2018
Abstract
We study the role of morality in debt repayment, using an experiment with the credit card customers of a large Islamic bank in Indonesia. In our main treatment, clients receive a text message stating that “non-repayment of debts by someone who is able to repay is an injustice." This moral appeal decreases delinquency by 4.4 percentage points from a baseline of 66 percent, and reduces default among customers with the highest ex-ante credit risk. Additional treatments help benchmark the effects against direct financial incentives, and rule out competing explanations, such as reminder effects, priming religion, and provision of new information.
Keywords: Morality, Moral Suasion, Debt
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