Using Behavioral Economics to Motivate BAAC Farmer Clients in Roi Et Province for Timely Debt Repayment

Abstract

This research aimed to study and compare the effectiveness of communication strategies applying behavioral economics principles to stimulate debt repayment among farmer clients of the Bank for Agriculture and Agricultural Cooperatives (BAAC) in Roi Et Province. The study employed a Randomized Controlled Field Trial (RCT) design, involving a sample of 400 BAAC farmer clients with outstanding debts of 0-3 months, who were randomly assigned to four groups a control group, a Loss Aversion experimental group, a Social Norms experimental group, and an Incentive experimental group. Data analysis utilized descriptive and inferential statistics, specifically the Chi-square test. Descriptive findings indicated that the Incentive group achieved the highest debt repayment rate at 36%, followed by the Loss Aversion group at 32%, the Social Norms group at 25%, and the control group at 5%. All three behavioral communication strategies significantly outperformed the traditional control method. The Chi-square test results confirmed a statistically significant relationship between the experimental groups and debt repayment behavior at the.05 level ((3)=27.50, p<.00). This signifies that the different communication strategies genuinely led to different debt repayment rate. While the Incentive strategy showed the highest repayment rates in the initial weeks, the Social Norms strategy became most prominent in Week 4, demonstrating a time-varying effectiveness. The Loss Aversion strategy maintained high and consistent effectiveness throughout the experiment. The research suggests that BAAC should consider adopting behavioral communication strategies, particularly the highly effective Loss Aversion strategy, which incurs no additional financial cost. These findings provide robust empirical evidence that subtle, psychologically designed "nudges" can significantly and measurably impact critical financial behaviors like debt repayment, highlighting the practical utility of behavioral economics in real-world financial operations.