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The Potential of Digital Credit to Bank the Poor

Author

Listed:
  • Daniel Björkegren
  • Darrell Grissen

Abstract

Many households in developing countries lack access to credit: physically providing small loans to poor and remote populations is costly. However, the digitization of developing countries enables a new model: digital credit delivered directly via mobile phones. Mobile money enables inexpensive financial transfers, and mobile phones capture behavior that can predict repayment when mined with machine learning. This paper evaluates the potential for digital credit to reach those excluded from current financial systems.

Suggested Citation

  • Daniel Björkegren & Darrell Grissen, 2018. "The Potential of Digital Credit to Bank the Poor," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 68-71, May.
    • Handle: RePEc:aea:apandp:v:108:y:2018:p:68-71
    Note: DOI: 10.1257/pandp.20181032
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    File URL: https://www.aeaweb.org/doi/10.1257/pandp.20181032
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    Citations

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    Cited by:

    1. Suri, Tavneet & Bharadwaj, Prashant & Jack, William, 2021. "Fintech and household resilience to shocks: Evidence from digital loans in Kenya," Journal of Development Economics, Elsevier, vol. 153(C).
    2. Xuwen Pan & Cai Zhou, 2023. "The impact of e‐commerce city pilot on the spatial agglomeration of high‐end service industry in China," International Studies of Economics, John Wiley & Sons, vol. 18(3), pages 326-350, September.
    3. Prashant Bharadwaj & William Jack & Tavneet Suri, 2019. "Fintech and Household Resilience to Shocks: Evidence from Digital Loans in Kenya," NBER Working Papers 25604, National Bureau of Economic Research, Inc.
    4. Jenny Aker & Joel Cariolle, 2022. "The Use of Digital for Public Service Provision in Sub-Saharan Africa," Post-Print hal-03003899, HAL.
    5. Valentina Michelangeli & Eliana Viviano, 2024. "Can Internet Banking Affect Households' Participation in Financial Markets and Financial Awareness?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 56(4), pages 705-739, June.
    6. Hoang, Daniel & Wiegratz, Kevin, 2022. "Machine learning methods in finance: Recent applications and prospects," Working Paper Series in Economics 158, Karlsruhe Institute of Technology (KIT), Department of Economics and Management.
    7. Daniel Kandie & Khan Jahirul Islam, 2022. "A new era of microfinance: The digital microcredit and its impact on poverty," Journal of International Development, John Wiley & Sons, Ltd., vol. 34(3), pages 469-492, April.
    8. I. Ramsay & T. Williams, 2020. "Peering Forward, 10 Years After: International Policy and Consumer Credit Regulation," Journal of Consumer Policy, Springer, vol. 43(1), pages 209-226, March.
    9. Daniel Bjorkegren & Darrell Grissen, 2017. "Behavior Revealed in Mobile Phone Usage Predicts Loan Repayment," Papers 1712.05840, arXiv.org, revised Dec 2019.
    10. Gabriel E. Kreindler & Yuhei Miyauchi, 2019. "Measuring Commuting and Economic Activity inside Cities with Cell Phone Records," Boston University - Department of Economics - Working Papers Series WP2020-006, Boston University - Department of Economics, revised Apr 2020.
    11. Song, Yunxing & Gong, Yuanyuan & Song, Yan & Chen, Xiaohui, 2024. "Exploring the impact of digital inclusive finance on consumption volatility: Insights from household entrepreneurship and income volatility," Technological Forecasting and Social Change, Elsevier, vol. 200(C).
    12. Constantin Johnen & Oliver Mußhoff, 2023. "Digital credit and the gender gap in financial inclusion: Empirical evidence from Kenya," Journal of International Development, John Wiley & Sons, Ltd., vol. 35(2), pages 272-295, March.
    13. Yang, Tong & Zhang, Xun, 2022. "FinTech adoption and financial inclusion: Evidence from household consumption in China," Journal of Banking & Finance, Elsevier, vol. 145(C).
    14. Li, Xingguang & Zhang, Jianjun, 2024. "Rural digital credit and residential energy consumption: Evidence from the agricultural production perspective," Energy, Elsevier, vol. 290(C).

    More about this item

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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