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

Valentina Brailovskaya, Pascaline Dupas and Jonathan Robinson

No 29573, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: D14 O12 O16 (search for similar items in EconPapers)
Date: 2021-12
New Economics Papers: this item is included in nep-afr, nep-ban, nep-fdg, nep-fle, nep-mfd and nep-pay
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Published as Valentina Brailovskaya & Pascaline Dupas & Jonathan Robinson, 2024. "Is Digital Credit Filling a Hole or Digging a Hole? Evidence from Malawi," The Economic Journal, vol 134(658), pages 457-484.

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