The rise of digital finance: Financial inclusion or debt trap?

Pengpeng Yue, Aslihan Gizem Korkmaz, Zhichao Yin and Haigang Zhou

Finance Research Letters, 2022, vol. 47, issue PA

Abstract: This study focuses on the impact of digital finance on households. While digital finance has brought financial inclusion, it has also increased the risk of households falling into a debt trap. We provide evidence that supports this notion and explain the channel through which digital finance increases the likelihood of financial distress. Our results show that the widespread use of digital finance increases credit market participation. The broadened access to credit markets increases household consumption by changing the marginal propensity to consume. However, the easier access to credit markets also increases the risk of households falling into a debt trap.

Keywords: Fintech; Digital lending; Financial inclusion; Digital financial literacy; Debt trap (search for similar items in EconPapers)
JEL-codes: G51 G53 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (57)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:47:y:2022:i:pa:s1544612321005432

DOI: 10.1016/j.frl.2021.102604

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