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Nano-Loans and CDR-based Credit Scores: Financial Inclusion for the Unbanked

Financial Inclusion Haiti
Focus group discussions in Haiti. Credit: Oscar Barriga Cabanillas

While nano-loans (loans of under 20 USD) may serve the working poor as a valuable source of short-term capital, they simultaneously raise concerns about debt cycles and default. This exploratory study showed that nano-loans in Haiti would likely appeal to individuals with limited capacity to save, volatile income, and low food security. In collaboration with Digicel, the main telecom provider, this study set out to refine the algorithm used to predict creditworthiness of borrowers using call detail records (CDRs), while understanding the impacts of this approach on the borrowers themselves. Using regression discontinuity around a credit score cutoff, and randomization of nano-loan offers, Lybbert and team intend to estimate the effects of nano-loans on consumption patterns, short-term food security, debt portfolios and the total cost of debt. Periodic phone surveys and SMS-based mini-surveys will be conducted for high frequency data. The findings will contribute to the targeting, marketing and design of novel financial products for vulnerable populations. Results forthcoming.

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Financial Inclusion

DCO Quarterly Newsletter: February 2020


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