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

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