Skip to main content Skip to secondary navigation

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

work, Entrepreneurship, and finance

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.

wp1096.pdf (6.29 MB)
Valentina Brailovskaya
Pascaline Dupas
Jonathan Robinson
Publication Date
December, 2021