Study Overview
The study examines whether access to digital credit—specifically, short-term, high-interest loans issued via mobile apps using nontraditional data—can improve borrowers’ financial well-being in developing economies. The key research questions are: Does digital lending enhance borrowers’ financial well-being? Under what borrower or loan characteristics is this impact more pronounced? The authors use proprietary data from Tala, a digital lender in Kenya. The lender randomly approved some applicants who would have otherwise been rejected based on credit scoring, creating a natural experiment. The study applies a difference-in-differences design, comparing changes in mobile-phone-based and survey-based welfare measures for these “treatment” borrowers versus “control” borrowers. Measures include mobile transaction amounts, mobile balances, mobility (e.g., cell towers and cities visited), social network size/strength, and self-reported income and employment.
Study Results
The study finds that access to digital credit significantly improves borrowers’ financial well-being. Treatment borrowers—those randomly approved for loans—show higher mobile transaction volumes, greater mobile balances, increased mobility, stronger social networks, and higher self-reported income and employment rates compared to control borrowers. The positive effects are more pronounced for borrowers with limited credit access, those borrowing for business purposes, and those receiving larger loan amounts.
Intervention Partner: Tala
News & media
How $40 Loans Lifted Lives in Kenya
April 24, 2025
“Ultimately, understanding how to responsibly integrate alternative credit models into developed economies like the US could have profound implications for financial inclusion, helping millions of individuals access fair and affordable credit while maintaining the integrity and safety of the financial system,” Kang says.