Working Paper: NBER ID: w25604
Authors: Prashant Bharadwaj; William Jack; Tavneet Suri
Abstract: Developing country lenders are taking advantage of fintech tools to create fully digital loans on mobile phones. Using administrative and survey data, we study the take up and impacts of one of the most popular digital loan products in the world, M-Shwari in Kenya. While 34% of those eligible for a loan take it, the loan does not substitute for other credit. The loans improve household resilience: households are 6.3 percentage points less likely to forego expenses due to negative shocks. We conclude that while digital loans improve financial access and resilience, they are not a panacea for greater credit market failures.
Keywords: Fintech; Digital Loans; Household Resilience; Kenya
JEL Codes: O16; O33; O55
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Access to M-Shwari loans (G21) | Likelihood of individuals taking out any loan (G51) |
| Access to M-Shwari loans (G21) | Credit access (G21) |
| Households eligible for M-Shwari loans (G51) | Likelihood to forego expenses in response to negative shocks (D12) |
| M-Shwari loans (G21) | Financial resilience (G51) |
| M-Shwari loans (G21) | Substitution from informal loans or loans from other financial institutions (G21) |