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Is faster always better? Evidence from Mexico’s digital credit market

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VoxDev, February 2021

The digital credit market serves millions of people needing access to fast, easy, short-term loans in low- and middle-income countries. While digital credit has proven to be helpful in addressing short-term liquidity constraints, the speed and ease of acquiring these loans can lead to impulsive borrowing, over-indebtedness, and default. In this VoxDevTalk, Silvia Prina discusses her recent work with Alfredo Burlando, and Michael Kuhn where they investigate whether the speed with which borrowers receive digital credit affects their likelihood of default.

Their research finds that longer wait times, by even a few hours, can lower the chances of default. Delaying the speed of delivery may provide individuals greater time to plan for how the loans will be used and develop a potential repayment plan. Strengthening regulation around the speed of digital credit disbursement may be one avenue to protect consumers from default and ensure higher repayment for lenders.

Listen to the story at VoxDev.

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