Can digital credit work for development?
The rise of digital credit is providing access to finance for those who have never had it before — but not enough is known about how digital credit products might alleviate, or entrench, poverty.
There are two times of day when M-Shwari, a digital banking platform in Kenya, sees huge demand. The first is in the early hours of the morning, when women prepare their produce for sale at the market. The second is late at night, when men place their bets on sports.
The rise of digital banking means that people around the world can now borrow, save or pay with their mobile phones. Digital credit providers are using alternative sources of data to determine creditworthiness and provide loans to populations that have never had access to them before.
But while these products offer a convenient way for consumers to access cash for personal or business expenses, they also present risks. If borrowers do not understand the loan terms, or take out more than they are able to repay, the result can be overindebtedness or a negative credit report.
