Working Paper: NBER ID: w29573
Authors: Valentina Brailovskaya; Pascaline Dupas; Jonathan Robinson
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: Digital Credit; Financial Literacy; Malawi
JEL Codes: D14; O12; O16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Access to digital loans (G21) | Alternative credit sources (G51) |
| Financial literacy intervention (G53) | Loan repayment (G51) |
| Financial literacy intervention (G53) | Loan demand (G51) |
| Financial literacy intervention (G53) | Risk of default (G33) |
| Access to digital loans (G21) | Financial wellbeing (G51) |