common for the majority of micro-credit. Though part of the lower loan-to-new-toilet conversion rate could be explained by other constraints (e.g. absence of complementary investments or additional funds), this evidence also suggests that some households might have been sufficiently sophisticated to be less affected by the loan label. In line with this, we note that 28 percent of clients that took a sanitation loan already had a toilet before the roll-out of the intervention, and 9 percent of clients who took a sanitation loan and reported using it for sanitation did not have a toilet at the time of our endline survey. Thus, this evidence suggests that the label effect is likely to be heterogeneous across households.

Our study contributes to a number of literatures. First, it relates to the literature on credit constraints and human capital investments. A wide range of methodologies have been used to assess the importance of credit constraints in explaining education outcomes in developed and developing countries (Lochner and Monge-Naranjo, 2012; Solis, 2017 among others); and health investments (Dupas and Robinson, 2013; Guiteras et al., 2016). Within this, a small, but growing, literature uses randomised experiments to assess the scope for (bundled) microcredit loans to boost investments in preventive health products such as water connections (Devoto et al., 2012), bed-nets (Tarozzi et al., 2014), water filters (Guiteras et al., 2016) and sanitation construction materials (BenYishay et al., 2017). In contrast to many of these studies, we analyse a particularly lumpy investment that constitutes a much larger share of households’ wealth, and that was not bundled with the loan. .

It also contributes to a growing literature studying the role of labelling, and of the fungibility of money. Labels can be thought of as a ‘nudge’, defined by Thaler and Sunstein [2008] as “any aspect of the choice architecture that alters people’s behaviour in a predictable way without forbidding any options or significantly changing their economic incentives”.<sup>6</sup> Recent contributions show that individuals do not adjust other spending in response to the provision of vouchers earmarked for specific spending items (Abeler and Marklein, 2017; Hastings and Shapiro, 2018); while other studies show that labelled cash transfers and benefits are disproportionately spent on the named expenditure category (Beatty et al., 2014;Benhassine et al., 2015). A field experiment by De Arcangelis et al. [2015] finds that adding an education label to a remittance product increases remittances by Filipino migrants in Rome by 15 percent (relative to a case with no label), with the additional commitment of sending money directly to a school adding only 2.2 percent over the effect with the label only. By contrast, Afzal et al. [2018] find little demand from Pakistani microfinance clients for features offering hard or soft commitment, though these improve repayment rates. We contribute to this literature by studying labelled loans, and showing theoretically that loan labels can matter for borrowing and investment decisions.

Finally, our study links to a growing literature studying the adoption of safe sanitation in developing countries. Rigorous evidence is now available on the effectiveness of a number of sanitation interventions in different contexts, many of which entail (contrary to the setting in this study) an informational component, most often in the form of the widely adopted community led total sanitation approach (CLTS).<sup>7</sup> Programs that are very intense and/or are combined with the relaxation of financial con-

> 6Nudges have been shown to be extremely powerful in a number of contexts, including increased enrolment in defined contribution retirement savings plans (Madrian and Shea, 2001) and organ donation compliance rates (Johnson and Goldstein, 2003), simply by changing default options.

> 7This seeks to motivate communities to come together to improve their sanitation situation following a ‘triggering’

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