Valentina Brailovskaya, Pascaline Dupas, Jonathan Robinson
{"title":"Is Digital Credit Filling A Hole or Digging a Hole? Evidence from Malawi","authors":"Valentina Brailovskaya, Pascaline Dupas, Jonathan Robinson","doi":"10.1093/ej/uead083","DOIUrl":null,"url":null,"abstract":"Abstract Digital credit has expanded rapidly in Africa, with opaque loan terms amidst low consumer financial literacy. Rich data from Malawi shows substantial demand for a digital loan with a base interest rate of 10% over 15 days, yet most borrowers are not aware of loan terms, repay late and incur substantial late fees. Regression discontinuity analyses show no evidence that access to small digital loans harms consumers’ perceived well-being. A short, randomised, phone-based financial literacy intervention improved knowledge but did not increase timely loan repayment, and modestly increased loan demand, ultimately increasing the likelihood of ever defaulting.","PeriodicalId":48448,"journal":{"name":"Economic Journal","volume":null,"pages":null},"PeriodicalIF":3.8000,"publicationDate":"2023-10-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Economic Journal","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1093/ej/uead083","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"ECONOMICS","Score":null,"Total":0}
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Abstract
Abstract Digital credit has expanded rapidly in Africa, with opaque loan terms amidst low consumer financial literacy. Rich data from Malawi shows substantial demand for a digital loan with a base interest rate of 10% over 15 days, yet most borrowers are not aware of loan terms, repay late and incur substantial late fees. Regression discontinuity analyses show no evidence that access to small digital loans harms consumers’ perceived well-being. A short, randomised, phone-based financial literacy intervention improved knowledge but did not increase timely loan repayment, and modestly increased loan demand, ultimately increasing the likelihood of ever defaulting.
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The Economic Journal is the Royal Economic Society''s flagship title, and is one of the founding journals of modern economics. Over the past 125 years the journal has provided a platform for high quality and imaginative economic research, earning a worldwide reputation excellence as a general journal publishing papers in all fields of economics for a broad international readership. It is invaluable to anyone with an active interest in economic issues and is a key source for professional economists in higher education, business, government and the financial sector who want to keep abreast of current thinking in economics.
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