While microfinance has not broadly succeeded in relaxing credit constraints for the poor in low- and middle-income countries, a new form of credit using “digital collateral” is effective, a study by Paul Gertler, Brett Green, and Catherine Wolfram finds.

Digital collateral allows a person to borrow in order to buy an asset, such as a smartphone, and use the phone to collateralize the loan. If the borrower fails to make payments, the lender can lock the phone remotely until payments are resumed.”

Read more about Gertler and Wolfram’s research here.

Previous How Debit Cards Are Helping Low-Income Households Save – and Benefiting Their Neighbors Too | Qrius Next Testing financial innovations: Increasing loan repayment using digital collateral | VoxDev