In the social sector, it’s not always possible to test the impact of a designed solution. This often leaves us wondering whether resources are spent in ways that have real effects on welfare. The BETA Projectwas a unique opportunity to design behavioral solutions for three partner sites and test each solution to see whether or not it had an impact on the respective program.
Findings
What we found is encouraging. As discussed in our brief from the project, we discovered that small changes to program design, inspired by behavioral economics, can have a real impact on program effectiveness:
• At Accion, we saw that simple reminders reduced Non-Sufficient Funds fees and increased on-time payments—especially among the most vulnerable borrowers. The impact on “risky” borrowers is particularly significant in light of Accion’s mission to reach this underserved population, but it has larger implications as well. Access to credit is important; it can help vulnerable borrowers grow a business, stabilize the amount of money available each month and deal with emergencies. Improving repayment behaviors among this borrower segment could reduce costs and help justify expanding services to this population.
• At Cleveland Housing Network, we saw effects of the raffle on rent payment throughout the month, even after late fees were applied, suggesting a more profound effect on behavior than mere financial motivation. The fact that these effects persisted throughout the month, even after late fees were applied, suggests a more profound effect on behavior than mere financial motivation. Countless programs and products have payment (or repayment) problems in the asset-building field. If we find that this effect scales, it has the potential for massive impact.
• At Neighborhood Trust, we saw that simple plan-making facilitates action, and observed a promising increase in people’s utilization of accounts. While our results at Neighborhood Trust were indicative, and not conclusive due to small sample size, similar efforts to prompt action at Grameen Bank resulted in similar-sized effects on savings account usage but at a statistically significant level. Sites providing financial education should marry their education efforts with concrete steps to assist people in taking actions (such as through simple plan-making) that move them towards a stronger financial position.
These effects are not just statistics. There are real people who benefitted from the BETA project. Moreover, the solutions were relatively inexpensive, with direct costs of less than $5,000 at each organization. The primary cost was the investment in staff time to work with the BETA Project team to diagnose the problem and design solutions. All three sites have decided to continue to use some form of the tested solutions in the future. These findings speak volumes about ways other asset-building programs can make small adjustments to deal with these common problems and have a real impact.
Implications
In thinking about why the reminders, raffles and simple plan-making activities had a real impact for our partner sites, we were able to uncover three important lessons for program and product design in the asset-building field:
1. Be preemptive. Asset-building organizations often start engaging with clients only after a problem, such as a missed payment, arises. While in-person interactions with clients can be expensive, there are many early opportunities for engagement through other communication channels with clients.
2. Incentives “buy” attention. Incentives can be a powerful tool for behavior change, but not always because of their financial benefit. Sometimes incentives are helpful because they capture people’s attention. They signal that doing the incentivized activity is important and perhaps encourage someone to prioritize that activity.
3. Facilitate action along with information. Information alone rarely leads to behavior change. Simple plan-making activities help to guide clients into action (e.g., active utilization of accounts). Organizations that seek behavior change should provide assistance through action-oriented activities like simple plan-making and direct access to relevant products and services to help clients follow through on their goals.
For more on these insights from the tests at our partner sites and tips for how organizations can design behavior-changing program solutions, please check out the Small Changes, Real Impact brief and report available on the BETA Project Publications and Events page.
