Innovating microcredit: how fintechs change the field

Rodrigo Leite, Layla Mendes and Emmanuel Camelo

Journal of Economics and Business, 2024, vol. 128, issue C, No S0148619523000516

Abstract: We explore the relationship between traditional microfinance screening variables and a new one (job experience) for a Brazilian fintech microcredit firm, which developed a strategy that targets poor workers using the clients’ job contracts as collateral and by implementing a 100% online application. A total of 911 contracts were analyzed. Unlike previous studies, we show that the main variable used for screening is job experience: borrowers with lengthy experience in their current jobs received larger loans with lower interest rates while maintaining smaller delinquencies. Additionally, we find that women receive lower interest rates and longer loan durations because of their job experience. We theorize that job experience helps to reduce the “collateral gap” between genders in Brazilian microcredit markets.

Keywords: Default; Fintech; Interest rates; Microcredit; Screening (search for similar items in EconPapers)
JEL-codes: G21 G29 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:128:y:2024:i:c:s0148619523000516

DOI: 10.1016/j.jeconbus.2023.106158

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