Too Fast, Too Furious? Digital Credit Delivery Speed and Repayment Rates

Alfredo Burlando, Michael Kuhn and Silvia Prina ()
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Silvia Prina: Northeastern University

No 16451, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Digital loans are a source of fast, short-term credit for millions of people. While digital credit broadens market access and reduces frictions, default rates are high. We study the role of the speed of delivery of digital loans on repayment. Our study uses unique administrative data from a digital lender in Mexico and a regression-discontinuity design. We show that reducing loan speed by doubling the delivery time from ten to twenty hours decreases the likelihood of default by 21%. Our findings suggest that selectively slowing down credit could improve lender profitability and help consumers avoid default.

Keywords: defaults; waiting periods; digital credit; financial access (search for similar items in EconPapers)
JEL-codes: D14 D18 G51 O16 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2023-09
New Economics Papers: this item is included in nep-ban, nep-mfd and nep-pay
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Published - published in: Journal of Development Economics, 2024, 174, 103427

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