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):
I have also seen the recent, also good CGAP research on lessons from digital credit in E. Africa:
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
Posted by: <hugh@vsla.net>
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