Incentives that work: 100% repayment rate

I just got off the phone with Ravo. She is our field manager in Ambalavao for the Masomboly project.

She reports that everything is running along smoothly. They had the first loan reimbursement on Saturday and she was very pleased to report that 88 out of 89 women made their payments on time and the holdout plans to pay back later this week. This is great news. It means that the project is maintaining its momentum even after near-doubling in size.

Since the group is so large now, we do the reimbursements in two meetings: one with all of the women who are borrowing individually and one with all of the women borrowing as part of groups.

Ravo reported that the women were paying back on time because they wanted to receive their bonus at the end of the lending cycle. This is exactly the response we planned when we set up the bonus system.

It works like this: We collect 10% interest, so essentially the women are required to pay back $33 for a loan of $30 due in six months. But, to incentivize reimbursement, Alison designed a system whereby the women who pay back every monthly installment on time get all of their interest back at the end of the lending cycle.

On my last trip in March I made sure we called out each woman by name and applauded for them both individually, when they received their envelopes, and as a group. You can see in this picture how excited the women were to receive their prizes. We were hoping that the message would be clear to the new borrowers that they too could get that bonus. So far it seems to be working.

It is surprising sometimes how such simple incentives can have such profound effects. But someone once said that you shouldn’t question success, so we’ll just enjoy the 100% repayment rate and keep working to make sure it continues.