Testing financial innovations: Increasing loan repayment using digital collateral | VoxDev
“There is a general consensus that households in low- and middle-income countries (LMICs) have insufficient access to credit. Twenty years ago, economists were optimistic that microfinance would fill this void, yet most of the evidence suggests that microfinance loans do not have transformative effects on the average borrower (Banerjee et al. 2015, Meager 2019).
In our recent paper (Gertler, Green, and Wolfram 2021), we argue that collateral need not be physically repossessed in order to serve a useful role in access to credit. Recent technological innovations have facilitated the use of digital collateral without the need for costly and inefficient physical repossession, where our findings help validate how securing a loan with digital collateral can lead to positive benefits for both borrower and lender.”