Is Digital Credit Filling a Hole or Digging a Hole? Evidence from Malawi

Pascaline Dupas, Valentina Brailovskaya and Jonathan Robinson

No 16848, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Digital credit has expanded rapidly in Africa, mostly in the form of short-term, high-interest loans offered via mobile money. Loan terms are often opaque and consumer financial literacy is low, providing opportunities for predatory lending. A regression discontinuity analysis shows no negative effect of access to digital loans on financial well-being, but the majority of borrowers fail to repay on time and incur high late fees. We randomize exposure to a short phone-based financial literacy intervention. The intervention improved knowledge and marginally improved loan repayment but increased loan demand, increasing overall default risk.

Keywords: Financial literacy; Predatory lending; Regression discontinuity; Randomized field experiment (search for similar items in EconPapers)
JEL-codes: D14 O12 O16 (search for similar items in EconPapers)
Date: 2021-12
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Journal Article: Is Digital Credit Filling a Hole or Digging a Hole? Evidence from Malawi (2024)
Working Paper: Is Digital Credit Filling a Hole or Digging a Hole? Evidence from Malawi (2021)
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