Moral Incentives in Credit Card Debt Repayment: Evidence from a Field Experiment

Moral Incentives in Credit Card Debt Repayment: Evidence from a Field Experiment

7 July, 2020  •  

We study the role of morality in debt repayment using an experiment with 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 increases the share of customers meeting their minimum payment by 15%, which is more than the effect of substantial financial incentives. Additional treatments help understand the underlying mechanisms and rule out competing explanations, such as reminder effects, priming religion, signalling the lender’s commitment to debt collection, and provision of new information.

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