Kenya Repayment Trial 2018
KEN -18 -1384Last modified on October 29th, 2025 at 12:03 pm
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Abstract
One Acre Fund (OAF) is an agricultural service provider that provides support for smallholder farmers in Africa to access agricultural inputs, training, and markets, to help the farmers increase their harvests and income. PAD and OAF began collaborating in 2016 on efforts to increase adoption of agricultural inputs and improve OAF operations in Kenya and Rwanda.
OAF's credit program requires all group members to complete repayments to qualify for the loan in the following season. A simple model of group-liability lending suggests that informing members about the group’s progress toward repayment either spurs or reduces individual repayment. In a block randomized controlled trial with nearly 300,000 OAF members, we tested how SMS message reminders about the repayment status of the individual and the group affect the farmers’ loan repayment performance.
We find that the effects of SMS message reminders about repayment status are heterogeneous. Reminding borrowers about their own repayment status increased the probability of on-time repayment; informing borrowers who had paid off their loans early about their group’s repayment status had, on average, a small but significant adverse effect on the repayment performance of their group members. These findings suggest that peer monitoring in groups may backfire in underperforming groups, by lowering the individual's incentive to repay, and that individual messages are more effective in promoting timely repayment. -
Status
Completed
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Start date
Q1 Feb 2018
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End date
Q3 Aug 2018
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Experiment Location
Kenya
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Partner Organization
One Acre Fund (OAF)
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Agricultural season
Long Rains
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Experiment type
A/B test
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Sample frame / target population
OAF farmers and farmer groups
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Sample size
291,000
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Outcome type
Financial behavior
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Mode of data collection
Partner administrative data
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Research question(s)/hypotheses
1. Do SMS message reminders increase loan repayment in the OAF context?
2. What are the effects of individual and group-level reminders? -
Research theme
Communication technology, Message framing
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Research design notes
In February 2018, 291,000 farmers in over 40,000 farmer groups located across 1,500 sites (a site is a geographic division supervised by one program field officer) were block randomized into three equally sized experimental groups based on group size, site, and the percentage of group members that had already paid at the time of randomization. Groups were assigned to receive no reminders (C), reminders about individual repayment (T1), or reminders about individual and group repayment (T2). Of the farmers in the groups assigned to receive reminder messages (i.e., T1 and T2), two-thirds were randomly selected to receive individual treatment with direct messages (treated farmers).
OAF implemented two waves of message campaigns. In the first campaign, starting on July 5, messages were sent three times a week to treated farmers, to encourage full repayment by the early date of July 22. In the second campaign, weekly reminders about repayment were sent to treated farmers in the month preceding the official deadline, which was September 2. Throughout the experiment, only treated farmers received individual reminders. The only message untreated farmers could ever receive was a group reminder, and they would only receive one if they had completed repayment of their own loan and still had members in their group that had yet to finish repayment.
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Results
Individual SMS messages significantly increased early repayment rates; the individual messages boosted completion by the early deadline by 3.9 percentage points (pp) from 27.4% to 31.3%, and by the later deadline by 1.5 pp from 75.5% to 77.0%. When the repayment deadline was extended by three weeks during the trial year, individual messaging effects diminished to just 0.3 pp, with no significant group-level effects by the extended deadline.
By contrast, group reminders proved ineffective or possibly counterproductive—farmers in groups that received group reminders were 0.4 pp less likely to complete loans by the official deadline, compared to those receiving only individual reminders, although this effect was only marginally significant. Further sub-group analysis reveals that this adverse effect was driven by underperforming groups based on the average loan repayment percentage in their group. While these results are not significant, the general trend would be consistent with the observation that informing group members that their fellow members are struggling to repay might reduce the incentive to repay individually. However, in cases where the group is reasonably close to completing repayments, these messages may be an effective way to facilitate coordination.
These findings indicate that individual loan status reminders, but not group loan status reminders, can support OAF program performance. Although individual loan reminders do not affect the final loan repayment status, increasing the proportion of farmers who complete early repayments can reduce the cost of loan monitoring and allow extension workers to invest more time in onboarding farmers for the next season.