The rise of digital finance: Financial inclusion or debt trap

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

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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.

Date: 2022-01
New Economics Papers: this item is included in nep-cfn, nep-cwa, nep-fdg, nep-fle and nep-pay
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Citations: View citations in EconPapers (85)

Published in Finance Research Letters, 2021, 102604

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2201.09221

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