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

Valentina Brailovskaya, Pascaline Dupas, Jonathan Robinson

Research output: Contribution to journalArticlepeer-review

3 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)457-484
Number of pages28
JournalEconomic Journal
Volume134
Issue number658
DOIs
StatePublished - Feb 1 2024

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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