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Too Fast, Too Furious? Digital Credit Delivery Speed and Repayment Rates

Author

Listed:
  • Burlando, Alfredo

    (University of Oregon)

  • Kuhnk, Michael A.

    (University of Oregon)

  • Prina, Silvia

    (Northeastern University)

Abstract

Digital loans are a source of fast, short-term credit for millions of people. While digital credit broadens market access and reduces frictions, default rates are high. We study the role of the speed of delivery of digital loans on repayment. Our study uses unique administrative data from a digital lender in Mexico and a regression-discontinuity design. We show that reducing loan speed by doubling the delivery time from ten to twenty hours decreases the likelihood of default by 21%. Our findings suggest that selectively slowing down credit could improve lender profitability and help consumers avoid default.

Suggested Citation

  • Burlando, Alfredo & Kuhnk, Michael A. & Prina, Silvia, 2023. "Too Fast, Too Furious? Digital Credit Delivery Speed and Repayment Rates," IZA Discussion Papers 16451, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp16451
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    More about this item

    Keywords

    digital credit; waiting periods; defaults; financial access;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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