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A new era of microfinance: The digital microcredit and its impact on poverty

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  • Daniel Kandie
  • Khan Jahirul Islam

Abstract

Instant and low‐cost access to digital microcredit attracts millions of borrowers. Using household panel data, we study the impacts of digital microcredit on poverty in Kenya and compare the impact with traditional microcredit. We employ difference‐in‐differences and propensity score matching methods and find significant negative impacts of digital loans on poverty but do not find any significant impacts of the traditional microcredit on poverty. Results indicate that relatively better‐off households have access to digital loans compared to traditional microcredit. We emphasize the policy on regulation and behavioural tools that might help to reduce the welfare‐deteriorating impact of digital microcredit.

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  • 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.
    • Handle: RePEc:wly:jintdv:v:34:y:2022:i:3:p:469-492
    DOI: 10.1002/jid.3607
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