Improving payment for essential services – A field experiment in Nairobi, Kenya

Abstract: Utilities across the global require stable revenue streams to provide customers access to high quality energy, water, sanitation, and other essential services. This requires policy makers to set prices to cover costs, promote the efficient use of resources, and ensure services are affordable. It also requires that customers pay their bills. Historically, utilities have used disconnections, or the threat of disconnection, to compel customers to pay their bills on time. However, the increasing recognition of the human rights to water and sanitation by many governments and the COVID-19 pandemic have led some water utilities to discontinue or curtail disconnections. Reducing arrears and encouraging on-time bill payment is essential to get utilities in the Global South on the path to financial sustainability. This raises an important question for scholars and policy makers alike: if disconnection for essential services is viewed as socially or politically unacceptable, how can utilities encourage customers to pay their bills? In partnership with the water utility serving Nairobi, Kenya, we test the impact of a set of simple, low-cost reminders on customer bill payment using a pre-registered, randomized controlled trial of 50,000 residential customers. We use four measures of payment behavior: making any payment, paying the full current month’s bill, total arrears accumulated over the six months when messages were sent, and the fraction of the cumulative 6-month bill paid. We find that SMS-based bill payment reminders were not effective at improving bill payment on average. Nudges alone seem unlikely to solve the problem of water debt.