Sunday, January 6, 2019

Re: [MFP] Digest Number 4012

 


Dear Malcolm
As SHGs do, to individual bank accounts with the same banks, and as many MFIs don't, and don't want to, because they want to retain their more successful clients to subsidise the others, 
In the last two years the situation has changed a bit.  Many MFIs have enabled borrowers to open accounts so that they directly credit the loans.  Quite a few MFIs have become BCs of banks and as agents of banks lend microfinace loans.  Some of these customers are also directly taking loans from banks for larger amounts in subsequent cycles.  About 26% of all microfinance loans are given by banks.  
VLSAs are a good option till people's service needs outgrow the same. You can make radical arguments for direct bank accounts for people with tiny requirements - but such accounts inflict extraordinary transaction costs on the customer - I hope that you do not recommend that customers (I am talking about those in poorer parts of India) to spend 10% of their savings just to be able to bank the same and transact with it.
Best regards
srinivasan

On 06-Jan-2019, at 8:22 PM, MALCOLM HARPER malcolm.harper@btinternet.com [MicrofinancePractice] <MicrofinancePractice@yahoogroups.com> wrote:


Thank you Hugh, points taken, Lehman and all were and are terrible, but in general 'we' enjoy extraordinarily convenient low-cost financial services which enable us to deal with finance as it deserves; a vital service, like clean piped water, or good drainage, which we hardly notice because it is so good. 

Please let every allegedly 'pro-poor' initiative, in financial services or anything else, pass the test: 'does this offer a simple ladder for users if they wish to move up to services of the same quality that we enjoy ?'. and may not even allow them to 'rest', to be out of debt, for more than or two 'cycles' (? treadmills).   

And VSLAs do I hope and believe pass this test; do we have data on member 'graduation', people who opt out of VSLAs for private confidential accounts with banks, or go for both ? Or do we believe that VSLA membership is better than what I call a grown up bank account ? Are you a member of a VSLA ? How many of the  (? dwindling) readers of this group are ?

Malcolm

On Sunday, 6 January 2019, 12:18:31 GMT, hugh@vsla.net [MicrofinancePractice] <MicrofinancePractice@yahoogroups.com> wrote:


 

Dear Malcolm,

 

'Real grown up banking..'  In the light of Lehman, BoS, Northern Rock, 65% SHG repayment rates, and Andhra Pradesh, please define.  I agree entirely that moving cashless is positive and inevitable, but it is hardly being 'ghettoed' if you join a VSLA.  Tell that to the 50% of Nairobi's middle class who belong to banks and VSLAs both.  And to the 80% of Africa's rural population who are not yet reached by a ful suite of cashless savings and credit services.  'Ghettoed' services should never be promoted as a preferable source of service, except in the absence of attractive alternatives (which can offer immediate service,  provide an average 22% RoI and do not lead to over indebtedness).

 
 
 
 
 
 
 
 
 
 
 
 
 

From: MicrofinancePractice@yahoogroups.com <MicrofinancePractice@yahoogroups.com> 
Sent: 04 January 2019 17:45
To: MicrofinancePractice@yahoogroups.com; Will Ruddick <willruddick@gmail.com>
Subject: Re: [MFP] Digest Number 4012

 
  

Thank you Jami, and I am hopelessly out of date, so I should keep quiet, but of course digital money is not any kind of knight, whatever he (or do they have lady knights these days ?) may be wearing.  

 

It is though a remarkable step forward in the direction of making cash redundant. Cash is cumbersome, stealable, loseable and quite costly to make, store, and so on, hence we should cheer anything that looks towards its demise. 

 

I use it less and less, my grandchildren don't seem to bother with it much at all, and I gather that the ever sensible Swedes will soon be free of it. Nor do I go to my bank branch, as I wrote earlier. 

 

In principle, I am against preserving, or indeed introducing, anything that 'we' don't want to use but that 'we' think is all right for poor people. Hence I am delighted that groups are no longer necessary; I've never banked in a group and I don't want to. 

 

It's good too that some (too few) microfinance institutions are becoming real grown up banks, and that some (still too few) existing banks are reaching down to poorer people, not with special ghetto-ed services for the great unwashed, but with products such as the Indian self-help groups which offer a way into grown up banking. 

 

Of course such expedients may be necessary sometimes, but surely they should be temporary, aiming to disappear like smallpox vaccination has, because poverty has disappeared ? 

 

Malcolm

 
 
 

On Friday, 4 January 2019, 13:12:16 GMT, Jami Solli jamisolli@gmail.com [MicrofinancePractice] <MicrofinancePractice@yahoogroups.com> wrote: 

 
 
  

Thanks to you all; Hugh, Srivisan, Malcolm and Milford!  

 

I knew I could count on the group for insights and views from your current and past work.  

 

Please keep sharing thoughts and interesting projects, products and research you are involved in, or come across over the upcoming year.  I think this listserv is a great resource.

 

I am not a luddite by any means, but I find lack of data privacy, limited meaningful disclosures to consumers, increased potential for financial fraud on consumers through social engineering schemes, and easily breached security of many digital financial apps disturbing.  

 

All that combined with a litany of 'legacy' financial consumer protection problems (eg potential for over indebtedness, abusive debt collection (yes you can still go to jail in many countries for unpaid civil debts), high interest rates and opaque terms and conditions with consumers bearing almost all risks and sometimes even bearing the legal fees of the services provider) All this makes me very skeptical of fintech as the new poverty alleviating knight in shining armor.

 

At the end of the day, I don't think digital is better than cash, and the more I read about complementary currencies, the more I think diversity is the best route.  And, as Milford points out, M-Pesa may be too big to fail in the Kenyan economy at least.  Who are the other Safaricom partners btw?  Is this a publicly traded entity or a silent Vodafone plus friends venture?

 

On the bright side, take a look at what Will Ruddick and the GrassRoots Economics (.org) is doing in Kenya to create more financial and labor inclusion with a complementary currency, that happens to be digitalizing.  Kudos Will and GRE team!

 

Anyway, I very much appreciate all who participate in our hive mind discussions and have now added a complementary currency expert to our group :)

 

best,

Jami

 

On Fri, Jan 4, 2019 at 1:24 PM MALCOLM HARPER malcolm.harper@btinternet.com [MicrofinancePractice] <MicrofinancePractice@yahoogroups.com> wrote:

  

Thanks Milford, happy new year, and it's good to see that some things (and views) don't change.  Every movement needs gadflies, even gad-hornets, and you've been playing the role very well for 20 or 30 years, ever since you did that article for what was then (I think) called 'Small Enterprise Development' about MF's (maybe it was even MC then) destructive impact in erstwhile Yugoslavia. Please keep it coming. 

 

Malcolm  

 

On Friday, 4 January 2019, 11:23:30 GMT, milford bateman milfordbateman@yahoo.com [MicrofinancePractice] <MicrofinancePractice@yahoogroups.com> wrote: 

 
 
  

Hi Jami

 

Nice to hear from you and all the best for 2019!

 

I'm engaged this last few months on a new research stream looking into the fin-tech movement and its aims, structure, impact, etc. Unfortunately, I'm not finding very much to recommend the sector because it is essentially run by the very same institutions and individuals - the 'usual suspects'! - that took the microcredit model and went on to mightily abuse and destroy it for their own benefit. Kenya's M-Pesa is one example that everyone loves, but its likely to prove a disaster for the Kenyan economy is many ways - its already over-indebting the population to a great degree (its very often used for gambling purposes) and as the by far the largest and most profitable company in Kenya (M-Pesa is part of Safaricom, which is majority owned by the UK's Vodafone including through its South African subsidiary - Safaricom represents 40% of the stock exchange in Kenya) and the profits it makes and dividends it pays out and remits back to the UK and South Africa represent a spectacular loss of wealth and local demand for the Kenyan economy and society. Overall, you can see the contours emerging in Africa - digitally-mined wealth is now replacing mineral wealth as the new 'gold rush' in Kenya, and many parts of Africa, and the extractive potential, and so the potential to destroy the local economies, is huge. So all the upbeat talk about how the poor will have credit cards, internet accounts, can pay by mobile, etc, is actually a lot of camouflage: sure, you have some good things about fin-tech, which many talk about, but you also have many bad trends, which everyone is ignoring. We need a fuller cost-benefit analysis before we can realistically decide if fin-tech is a positive force for change. 

 

Just as in the microcredit sector in the early period, it is interesting that the big ideological and commercial supporters of fin-tech are also sponsoring 'research' by academics that lauds the fin-tech movement, especially M-Pesa, but so much of this work is false. Here we have Financial Sector Deepening (FSD) Kenya and the Gates Foundation, both aggressive supporters of the fin-tech paradigm and both desperate to locate and pay academics who will say nice things and, crucially, omit all the bad stuff.  The big two credit card companies are also sponsoring a load of work on the fin-tech paradigm and how Africa will escape poverty as a result, almost all of which, like the ratings by the big 3 ratings agencies before the 2008 crash, is bought and paid for nonsense (check out some of the recent reports by McKinsey, PWC, Deloitte, etc which make quite ludicrous claims for the power of the fin-tech model to benefit the poor)

 

We are right now completing a brief article for ROAPE examining the specious claims made by some US-based economists that M-Pesa is a major factor in poverty reduction in Kenya....however, I also presented my own initial thoughts on the fin-tech issue at a conference in Dubrovnik, including a look at M-Pesa, and it can be accessed here (comments welcome!): 

 
 

(PDF) FIN-TECH AS A DESTRUCTIVE FORCE IN THE FIELD OF LOCAL ECONOMIC DEV...

PDF | The so-called 'fin-tech revolution' represents one of the most important recent developments in the bankin...
 
 

Interested analysts should also consult work by the brilliant German business journalist, Norbert Haering, who has done some fantastic work identifying the institutions standing quietly behind the fin-tech movement, like Citigroup, Mastercard, Visa, Silicon Valley venture capitalists, etc, and including many manifestly fake 'astro-turf' institutions like the Better than Cash Alliance (BTCA). His work makes very uncomfortable reading because a whole range of commercial institutions with no real track record of assisting the poor now stand behind the fin-tech concept, in some cases design the framework, such as the G20 statements which were quietly authored by Citigroup consultants among others. Most of the institutions supporting the fin-tech movement have quite appalling records of profiteering, abusing and fleecing the poor in the developed economies, as many fines, legal cases and judgements against them testify to, so why on earth we think they will change their modus operandi in the emerging economies is quite beyond me. Mastercard, Visa, Wells Fargo, Citigroup, Barclays, etc - read the financial pages and you will see that they all have a whole range of legal actions against them down the years. If you read German, Norbert has a great book out on the demonetisation issue - he blogs at News - norberthaering.de

 

News - norberthaering.de

Blog des Wirtschaftsjournalisten Norbert Häring zu Wirtschaftspolitik für die Reichen und Mächtigen, zu Geldrefo....
 
 

Hope this stuff helps.. 

 

Best regards

 

Milford

 
 
 
 

New book out with Routledge: 'The Rise and Fall of Global Microcredit: Development, Debt and Disillusion' co-edited with Stephanie Blankenburg and Richard Kozul-Wright - go to https://www.routledge.com/The-Rise-and-Fall-of-Global-Microcredit-Development-debt-and-disillusion/Bateman-Blankenburg-Kozul-Wright/p/book/9781138714120

 

Milford Bateman

Freelance consultant on local economic development,

Visiting Professor of Economics, Juraj Dobrila University of Pula, Croatia

and 
Adjunct Professor of Development Studies, St Marys University, Halifax, Canada

________________________________

Email: milfordbateman@yahoo.com
Download my recent papers at: https://www.researchgate.net/profile/Milford_Bateman

 
 

On Friday, January 4, 2019, 5:55:54 AM GMT+1, <MicrofinancePractice@yahoogroups.com> wrote: 

 
 

4 Messages 

Digest #4012 

Messages 

Thu Jan 3, 2019 5:03 am (PST) . Posted by: 

"Jami Solli" 

Greetings Group & Happy 2019!

I believe I may be the first to post on this bright, shiny, new year.

I want to share an excellent blog post from the Center for Financial
Inclusion (I just noticed it while looking for research on the impact of
digital credit on consumers, though it dates from summer of last year):

https://www.centerforfinancialinclusion.org/start-ups-and-digital-innovation-are-fintechs-in-africa-over-indebting-their-customers/

I have also seen the recent, also good CGAP research on lessons from
digital credit in E. Africa:

https://www.cgap.org/topics/collections/digital-credit

And, wondering if anyone has seen related research on the impact of more,
short term digital debt on a population that potentially has existing money
lender, MFI, SACCO, salary loan etc. debts?

And, any existing research on whether or not these digital credit products
are actually financially including new clients?

Last question, what happens to clients who default on these digital loans
in the markets you are familiar with; are they just rolled over forever
with more and more fees attached? I believe E. Africa has the *in
duplum *rule:
would that apply to limit fees? Are defaults reported to the credit bureau?

Thanks in advance and wishing you all a wonderful New Year.

Jami Solli

Thu Jan 3, 2019 8:27 am (PST) . Posted by: 

hughvslanet 

Hello Jamie,

I read the SGAP paper a couple of weeks ago and I really wonder if the rush to digitise everything isn't confusing the ease of lending with the wisdom of lending. A 50% late payment rate tells me a) that lending institutions probably are not paying much attention to the difference on this point, beguiled by the siren song of things-made-easy and b) whoever thinks that credit should be easy to obtain should speak to my mother-in-law, who is German and wise in the ways of managing money with extreme prudence. The key point here is that borrowing should never be easy, in the sense that if there aren't credible and immediate sanctions for failing to repay, then high levels of delinquency are inevitable. That's why Savings Groups have low levels of delinquency: your neighbours will look askance, publicly, if you are in arrears so you think much more modestly and carefully about how to repay – before getting in to debt. But if the complaining voice is just an SMS it's not the same at all. Getting smart about how to lend using a digital solution is a long way from being certain of repayment, in the absence of tangible consequences. Good luck on that one, especially when you have to compete with SGs that allow for flexible repayments and are way ahead in terms of KYC.

Hugh Allen

From: MicrofinancePractice@yahoogroups.com <MicrofinancePractice@yahoogroups.com> 
Sent: 03 January 2019 08:28
To: MicrofinancePractice@yahoogroups.com
Subject: [MFP] article on digital credit & potential for over indebtedness

Greetings Group & Happy 2019!

I believe I may be the first to post on this bright, shiny, new year..

I want to share an excellent blog post from the Center for Financial Inclusion (I just noticed it while looking for research on the impact of digital credit on consumers, though it dates from summer of last year): 

https://www.centerforfinancialinclusion.org/start-ups-and-digital-innovation-are-fintechs-in-africa-over-indebting-their-customers/ 

I have also seen the recent, also good CGAP research on lessons from digital credit in E. Africa:

https://www..cgap.org/topics/collections/digital-credit <https://www.cgap.org/topics/collections/digital-credit> 

And, wondering if anyone has seen related research on the impact of more, short term digital debt on a population that potentially has existing money lender, MFI, SACCO, salary loan etc. debts? 

And, any existing research on whether or not these digital credit products are actually financially including new clients? 

Last question, what happens to clients who default on these digital loans in the markets you are familiar with; are they just rolled over forever with more and more fees attached? I believe E. Africa has the in duplum rule: would that apply to limit fees? Are defaults reported to the credit bureau?

Thanks in advance and wishing you all a wonderful New Year.

Jami Solli

Thu Jan 3, 2019 10:48 am (PST) . Posted by: 

"N. Srinivasan" shrin54 

Hi Jamie
I wish you and all MFP followers a happy and exciting new year.
From what I see in many places, digitisation is taking the focus away from the financial inclusion objective. In most emerging economies cash is still king. The digitisation adds to the costs and still the people have to find their way to cash. Digitisation for example ensures that MFIs do not handle cash - they can get a bank account opened for each borrower and directly credit the loan amount to that account. Repayments are made by customer by sending an electronic transfer from their bank account using their mobile or a standing instruction with the bank. But when the loan is credited to the bank account by the MFI, the borrower has to use the ATM card to draw the cash - and in rural areas the ATM can be some distance away. Earlier the loans were disbursed in a place determined by the MFI either in the group during its meeting or in MFIs office. Now the rest of the group does not even know when the loan was disbursed. For the repayments the customer has to keep sufficient money in the bank account. So the customer has to go to the bank branch or a business correspondent to pay in the money to her account. The customer is still having to convert digital money in to cash. Repayments as a result require a visit to the bank branch or agent for depositing case in to the account and also attendance in the group meeting. The time spent by the customer on making a repayment thus increases unreasonably. Group liability for repayment is difficult to enforce when repayments are digital - others in the group might find ti difficult to verify onetime payment on the due date..
Unless the entire ecosystem is geared to run on electronic records, not much will be achieved by digitisation. It will transfer the problem of dealing with cash from institutions to individual customers and they will have a higher cost of transaction.
My view seems pessimistic and runs counter to the popular urge to 'go digital and all problems are solved'. Kenya in many might a unique story - not easily replicable in other markets.
Best regards
Srinivasan

> On 03-Jan-2019, at 7:25 PM, hugh@vsla.net [MicrofinancePractice] <MicrofinancePractice@yahoogroups.com> wrote:
> 
> 
> Hello Jamie,
> 
> 
> 
> I read the SGAP paper a couple of weeks ago and I really wonder if the rush to digitise everything isn't confusing the ease of lending with the wisdom of lending. A 50% late payment rate tells me a) that lending institutions probably are not paying much attention to the difference on this point, beguiled by the siren song of things-made-easy and b) whoever thinks that credit should be easy to obtain should speak to my mother-in-law, who is German and wise in the ways of managing money with extreme prudence...... The key point here is that borrowing should never be easy, in the sense that if there aren't credible and immediate sanctions for failing to repay, then high levels of delinquency are inevitable. That's why Savings Groups have low levels of delinquency: your neighbours will look askance, publicly, if you are in arrears so you think much more modestly and carefully about how to repay – before getting in to debt. But if the complaining voice is just an SMS it's not the same at all. Getting smart about how to lend using a digital solution is a long way from being certain of repayment, in the absence of tangible consequences. Good luck on that one, especially when you have to compete with SGs that allow for flexible repayments and are way ahead in terms of KYC.
> 
> 
> 
> Hugh Allen
> 
> 
> 
> From: MicrofinancePractice@yahoogroups.com <mailto:MicrofinancePractice@yahoogroups.com> <MicrofinancePractice@yahoogroups.com <mailto:MicrofinancePractice@yahoogroups.com>> 
> Sent: 03 January 2019 08:28
> To: MicrofinancePractice@yahoogroups.com <mailto:MicrofinancePractice@yahoogroups.com>
> Subject: [MFP] article on digital credit & potential for over indebtedness
> 
> 
> 
> 
> 
> Greetings Group & Happy 2019!
> 
> 
> 
> I believe I may be the first to post on this bright, shiny, new year.
> 
> 
> 
> I want to share an excellent blog post from the Center for Financial Inclusion (I just noticed it while looking for research on the impact of digital credit on consumers, though it dates from summer of last year): 
> 
> 
> 
> https://www.centerforfinancialinclusion.org/start-ups-and-digital-innovation-are-fintechs-in-africa-over-indebting-their-customers/ <https://www.centerforfinancialinclusion.org/start-ups-and-digital-innovation-are-fintechs-in-africa-over-indebting-their-customers/> 
> 
> 
> 
> I have also seen the recent, also good CGAP research on lessons from digital credit in E. Africa:
> 
> 
> 
> https://www..cgap.org/topics/collections/digital-credit <https://www.cgap.org/topics/collections/digital-credit> 
> 
> 
> 
> And, wondering if anyone has seen related research on the impact of more, short term digital debt on a population that potentially has existing money lender, MFI, SACCO, salary loan etc. debts? 
> 
> 
> 
> And, any existing research on whether or not these digital credit products are actually financially including new clients? 
> 
> 
> 
> Last question, what happens to clients who default on these digital loans in the markets you are familiar with; are they just rolled over forever with more and more fees attached? I believe E. Africa has the in duplum rule: would that apply to limit fees? Are defaults reported to the credit bureau?
> 
> 
> 
> Thanks in advance and wishing you all a wonderful New Year.
> 
> 
> 
> Jami Solli
> 
> 
> 
> 
> 
> 
> 
> 
> 
> 
> <image001. jpg>< image003. jpg>< image002. jpg>

Thu Jan 3, 2019 1:32 pm (PST) . Posted by: 

"MALCOLM HARPER" malcolm.harper@btinternet.com 

Thanks Srini, happy new year to all, and (from the distant past) I agree, sort of. Like most innovations, digital cash is superb for most people (except old ones like me who cannot manage it, but that's thankfully another issue !), including many quite poor people who were excluded before,  but it tends to exclude the poorest. See Sanjay Sinha's and Yasmin Rabeya's paper on just this subject in Enterprise Development and Microfinance in March last year.
When I've been 'selling' the notion of microfinance, 'academically' but also in communities in Somalia and so on, I've always been rather ashamed of the fact that it's clients have to access the services in groups; after all, which of us who reads this exchange does their banking in a group or would willingly do so ?  
But digitisation, mobile money, even in as humble a form as a personal SIM card and a phone that is shared with lots of others, means that the physical 'excuse' for group banking, the need to collect and distribute cash, no longer exists. And, they no longer have to endure the indignity or waste the time involved in going to a bank branch, or trusting a neighbour to do it for them. Nor do I, I've not been to my bank for fifteen years or so, I don't even know where the branch is when I e-mail it or (very rarely) telephone it to complain about something.  
So, we cannot and should not be Luddites, and deplore the disappearance of cash. We should work very hard to get digital money usable down and down the poverty scale, as the GoI has been doing, with extraordinary success, but accept that people who are at the very bottom, like the 'woman dying at the back of the tent', as the sad phrase went in Somalian refugee camps many years ago, are in no position to make use of digital money or anything else except direct assistance,  handouts in fact..     
Malcolm
On Thursday, 3 January 2019, 19:00:19 GMT, 'N. Srinivasan' shrin54@yahoo.co.in [MicrofinancePractice] <MicrofinancePractice@yahoogroups..com> wrote: 

  
Hi Jamie
I wish you and all MFP followers a happy and exciting new year.From what I see in many places, digitisation is taking the focus away from the financial inclusion objective.  In most emerging economies cash is still king.  The digitisation adds to the costs and still the people have to find their way to cash.  Digitisation for example ensures that MFIs do not handle cash - they can get a bank account opened for each borrower and directly credit the loan amount to that account.  Repayments are made by customer by sending an electronic transfer from their bank account using their mobile or a standing instruction with the bank.  But when the loan is credited to the bank account by the MFI, the borrower has to use the ATM card to draw the cash - and in rural areas the ATM can be some distance away.  Earlier the loans were disbursed in a place determined by the MFI either in the group during its meeting or in MFIs office..  Now the rest of the group does not even know when the loan was disbursed.  For the repayments the customer has to keep sufficient money in the bank account.  So the customer has to go to the bank branch or a business correspondent to pay in the money to her account. The customer is still having to convert digital money in to cash. Repayments as a result require a visit to the bank branch or agent for depositing case in to the account and also attendance in the group meeting. The time spent by the customer on making a repayment thus increases unreasonably. Group liability for repayment is difficult to enforce when repayments are digital - others in the group might find ti difficult to verify onetime payment on the due date.Unless the entire ecosystem is geared to run on electronic records, not much will be achieved by digitisation.  It will transfer the problem of dealing with cash from institutions to individual customers and they will have a higher cost of transaction.My view seems pessimistic and runs counter to the popular urge to 'go digital and all problems are solved'.  Kenya in many might a unique story - not easily replicable in other markets.Best regardsSrinivasan

On 03-Jan-2019, at 7:25 PM, hugh@vsla.net [MicrofinancePractice] <MicrofinancePractice@yahoogroups.com> wrote:

Hello Jamie,

 

I read the SGAP paper a couple of weeks ago and I really wonder if the rush to digitise everything isn't confusing the ease of lending with the wisdom of lending.  A 50% late payment rate tells me a) that lending institutions probably are not paying much attention to the difference on this point, beguiled by the siren song of things-made-easy and b) whoever thinks that credit should be easy to obtain should speak to my mother-in-law, who is German and wise in the ways of managing money with extreme prudence......  The key point here is that borrowing should never be easy, in the sense that if there aren't credible and immediate sanctions for failing to repay, then high levels of delinquency are inevitable.  That's why Savings Groups have low levels of delinquency: your neighbours will look askance, publicly, if you are in arrears so you think much more modestly and carefully about how to repay – before getting in to debt.  But if the complaining voice is just an SMS it's not the same at all. Getting smart about how to lend using a digital solution is a long way from being certain of repayment, in the absence of tangible consequences.  Good luck on that one, especially when you have to compete with SGs that allow for flexible repayments and are way ahead in terms of KYC.

 

Hugh Allen

 

From: MicrofinancePractice@yahoogroups.com <MicrofinancePractice@yahoogroups.com> 
Sent: 03 January 2019 08:28
To: MicrofinancePractice@yahoogroups.com
Subject: [MFP] article on digital credit & potential for over indebtedness

 

  

Greetings Group & Happy 2019!

 

I believe I may be the first to post on this bright, shiny, new year.

 

I want to share an excellent blog post from the Center for Financial Inclusion (I just noticed it while looking for research on the impact of digital credit on consumers, though it dates from summer of last year):  

 

https://www.centerforfinancialinclusion.org/start-ups-and-digital-innovation-are-fintechs-in-africa-over-indebting-their-customers/ 

 

I have also seen the recent, also good CGAP research on lessons from digital credit in E. Africa:

 

https://www..cgap.org/topics/collections/digital-credit 

 

And, wondering if anyone has seen related research on the impact of more, short term digital debt on a population that potentially has existing money lender, MFI, SACCO, salary loan etc. debts?  

 

And, any existing research on whether or not these digital credit products are actually financially including new clients?  

 

Last question, what happens to clients who default on these digital loans in the markets you are familiar with; are they just rolled over forever with more and more fees attached?  I believe E. Africa has the in duplum rule:  would that apply to limit fees?  Are defaults reported to the credit bureau?

 

Thanks in advance and wishing you all a wonderful New Year.

 

Jami Solli

 

 

 

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