| Abstract: |
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. |