Moral Incentives in Credit Card Debt Repayment: Evidence from a Field Experiment
This paper studies the role of morality in debt repayment, using an experiment with the credit card customers of a large Islamic bank in Indonesia.
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.
This is an output of the World Bank’s Strategic Research Program
Citation
Bursztyn, Leonardo, Stefano Fiorin, Daniel Gottlieb, and Martin Kanz (2019), “Moral Incentives in Credit Card Debt Repayment: Evidence from a Field Experiment”, Journal of Political Economy, 127(4): 1641-1683 DOI: 10.1086/701605
Link
Moral Incentives in Credit Card Debt Repayment: Evidence from a Field Experiment