value of the dependent variable when available. β1 and β2 capture the effects of receiving a flexible contract for clients who received offers in the early and late recruitment periods respectively. We then estimate the average treatment effect by averaging the estimates for β1 and β2, proportionally to each period’s sample size.

First, we examine repayment behavior, default rates and loan renewal. Table 2 Columns 1 and 2 report outcomes from the administrative data for borrowers of the standard and flexible contract respectively. Panel A reports the raw outcomes while Panel B reports the residuals after regressing default outcomes on the 18 observable characteristics from Table 1 for the standard contract group (with first-stage R<sup>2</sup> values ranging from 0.07 to 0.10).

Regardless of the panel used, the flexible contract group has 3 and 2 percentage points higher proportion of the principal in default 3 and 12 months after maturity, respectively. Column 3 of Table 2 reports the p-value of equality of means and shows this increase in default is statistically significant (p-value<0.01). Despite these default results, we see no statistically significant differences in the share of borrowers who have missed a due payment (i.e., not counting skipped payments from a pass as missed) or the rate of loan renewal. We return below to this pattern of results when exploring the repayment behavior over the course of the loan.

Columns 4 and 5 report the means of the default outcomes in column 2, separating by whether the initial offer was flexible (column 4) or standard (column 5). Column 6 assesses the selection effect by reporting the p-value of the difference in means between columns 4 and 5. As with the comparison using observable characteristics in Table 1 or the use of passes in Appendix Table 5, none of the differences in either Panel A or B is statistically significant. Finally, column 7 reports the difference between borrowers of the standard contract in column 1 and borrowers of the flexible contract in column 5, all initially offered the standard contract. Since we find no selection (column 6), column 7 is similar to column 3 as overall differences in outcomes are attributable solely to differences in the contract.

Next, we examine repayment behavior over the course of the loan to shed additional light on the mechanisms for the results in Table 2. In each graph of Figure 2 we plot the outcome mean among standard borrowers (dashed line), the same mean plus the flexible credit coefficient based on regressions at each point in time (solid line) and the associated pointwise confidence intervals (dotted line). For reference, we also show the rate of pass use over time in a bar chart as in Appendix Figure 2. Again, we use the share of the loan maturity elapsed to account for the variation in loan lengths across the sample and we use the original loan maturity at loan issue to keep flexible and standard contract groups comparable. For additional technical details, see the notes at the bottom of Figure 2.

We document the following repayment patterns. The differential default between flexible and standard loans only appears after the end of the original maturity (Figure 2a). Flexible credit borrowers miss scheduled payments at the same rate as standard credit borrowers during the original loan period (when pass use does not count as a missed payment) but are significantly more likely to miss payments thereafter (Figure 2b). The cumulative rate of ever missing a payment is slightly higher for flexible borrowers, but