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

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.

Microfinance: A bibliometric exploration of the knowledge landscape

“…The adoption of digital tools in microfinance, as argued by scholars like Dorfleitner et al [ 92 ], not only aligns with the social performance of MFIs but also contributes significantly to their profitability and the development of their respective countries. Recent studies by Kandie & Islam [ 93 ] and Liu et al [ 94 ] emphasise that providing instant and affordable digital microcredit can attract a multitude of borrowers, thereby fostering greater financial inclusion and boosting efficiency in achieving microfinance's social objectives. The integration of technological advancements plays a pivotal role in enhancing efficiency within microfinance operations.…”

Comparative Impact of Formal and Informal Microcredits on Poverty Alleviation in the Haor Region of Bangladesh: A Socioeconomic Analysis

“…On the other hand, few scholars [26][27][28][29][30] established the negative impact of micro-credit on the livelihoods of borrowers in different forms such as on credit trap, group formation as risk sharing mechanism. Many scholars [15, 26,31,27,32,33,34] identified mixed effect of micro-credits on the livings of borrowers in terms of reduction of poverty, financing, increase of asset, income, consumption, revenue net worth, savings etc. considering the different types of borrowers, amount of loan, terms and conditions of loan and period.…”

The Peculiarities in Microfinance Trends: Analyzing Different Geographical Regions in the Period 2014-2021

“…The digital dimension also enables data analytics and risk assessment, enhancing the speed and accuracy of loan approvals. It can lower operational costs, reduce paperwork, and promote financial inclusion by extending services to individuals who were previously excluded from the formal financial sector, ultimately democratizing access to finance (Kandie et al, 2021).…”