Overall, the application outcome and eligibility process was similar for both groups (p-value of joint test is 0.67).

Panel C of Appendix Table 3 shows the take-up rates by recruitment modality. Door-to-door promotions and financial events had similar take-up rates of just over 20% of interested potential clients while over half of potential clients who came to the branch ended up with a loan. In all three recruitment modalities take-up rates were similar for standard and flexible offers.

# _Selection Effects on Observables_

This lack of differences in take-up _rates_ between the offers of standard and flexible loans suggests we are unlikely to see differential composition of clients across the two groups (if one assumes that the addition of flexibility is a free-disposal feature, and hence does not lower take-up rates for any set of individuals). Table 1 compares loan characteristics (from the administrative data) and client and business characteristics (collected by credit officers at the time of the loan application) between borrowers that accepted flexible and standard loan offers. Column 5 reports the p-values of a test of equality of means in columns 1 and 3 and shows that only one difference out of 18 is statistically significant at the 5% level (client’s age). It also reports the p-value of an F-test of joint equality for loan characteristics (p-value= 0.81), client characteristics (p-value= 0.37), business characteristics (p-value=0.81) and all characteristics combined (p-value=0.79). We conclude there is no evidence of differential selection on observables using a wide range of observable characteristics.

# _Selection Effects on Unobservables_

We next examine selection on unobservable characteristics by focusing on the use of flexible passes described in Figure 1 and Appendix Table 6. About a third of flexible clients used a pass at any point during the loan (Appendix Table 6, column 1), compared with only 2% among standard loan clients (column 2).<sup>7</sup> This take-up rate compares to a 31% flexible contract take-up among clients with standard contracts who were offered a flexible contract in Barboni and Agrawal (2023), with 56% of takers exercising their flexibility option. Our take up rate is lower than the 63% of flexible credit borrowers who used a “voucher” to postpone payments in Battaglia et al. (2023).

While most clients who used a pass at all used only one pass, 40% of such clients used a pass more than once. Flexible loan clients used 0.60 passes on average, roughly evenly split across extension-type passes that added to the maturity of the loan and no-extension type passes where the skipped principal had to be paid within the original loan duration. The limited pass use is consistent with only 8% of flexible credit clients using the maximum allowed number of passes.

Columns 5 and 6 of Appendix Table 6 compare pass use among clients initially offered the standard loan which later switched to a flexible loan to clients offered initially the flexible loan. P-values of a test of

> 7  Done for unknown reasons, i.e., unknown whether strategic by credit officers or mere administrative error. Regardless, all analysis follows the randomization employing intent-to-treat specifications.