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Estimating the Effect of Digital Credit: An Experiment with Airtel Malawi

Financial Inclusion Malawi

Digital credit may have promising features that can further contribute to financial inclusion. However, there is a lack of rigorous evidence on digital credit. This study aims to understand 1) the impacts of Airtel Malawi’s digital credit product Kutchova on borrowers, 2) the degree to which consumers are fully informed about these new products as well as the costs of taking out these loans, 3) the effect of having the access to mobile money savings account on demand for Kutchova loans, and 4) the characteristics of the consumers who take up Kutchova loans. This study will investigate these questions via a regression discontinuity design around the credit threshold (focusing on the effect of credit), and a randomized experiment (focusing on whether information or savings interventions reduce demand for credit). The findings will support policy makers and implementers in understanding the welfare impacts of digital credit and making critical decisions to enhance socio-economic development.

In addition, while digital financial products can help expand access to financial services, a gender gap in mobile phone access and mobile money accounts shows that these services reach more men than women (GSMA 2018, Findex 2017, Demirgüç-Kunt et al. 2018). In Malawi, this gap is dramatic — women make up only 38% of the mobile money subscriber base, and conditional on account ownership, women use their accounts less than men. Because credit scoring models rely on mobile money usage data, this gender gap translates to reduced access to digital credit for women. Therefore, additional funding from the Digital Credit Observatory (DCO) will allow researchers to gender balance the sample and expand the number of women in the study. The research has two main components. First, researchers will examine the effects of a financial literacy intervention on knowledge, attitudes, demand for loans, repayment rates, fees paid, and use of other sources of credit. Second, research will use administrative data and existing credit scoring procedures to measure the impact of digital consumer loans on financial behavior and wellbeing. Surveys will help illuminate whether the gender gap is explained by factors such as occupation, demands on income, financial literacy, or other factors. Results forthcoming.

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  • Airtel Malawi
  • IPA (Malawi)
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Financial Inclusion

DCO Quarterly Newsletter: October 2019


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