Business Training and Loan Repayment: Experimental Evidence from Microfinance

We study whether behaviorally informed information can improve the effectiveness of business training programs in microfinance. In collaboration with a leading microfinance institution (MFI) in Colombia, we implement a randomized encouragement design in which loan clients receive either a standard training invitation or an enhanced text message highlighting the business performance benefits of the practices taught in the course, using locally relevant statistics. While the information treatment does not increase training take-up—consistent with strong structural barriers to participation—we find meaningful short-run improvements in loan repayment behavior. An event-study analysis reveals that treated borrowers are significantly less likely to fall into delinquency and exhibit fewer days in arrears in the months immediately following treatment, with effects that gradually attenuate over time. Because training participation does not increase, these repayment improvements cannot operate through human capital accumulation. Instead, the evidence is consistent with behavioral channels, including salience effects and reciprocity toward the MFI, whereby enhanced informational messages strengthen borrowers’ motivation to repay. Our findings highlight both the limits of information-based interventions for increasing training participation and their potential as low-cost, scalable tools for improving financial behavior in microfinance settings.