The Impact of Mobile Business Literacy Interventions on Loan Repayment: An Application to MicrofinanceShow full item record
|Title||The Impact of Mobile Business Literacy Interventions on Loan Repayment: An Application to Microfinance|
|Abstract||With 26% of the world living on less than $3.20 per day with little to no access to financial liquidity, Microfinance Institutions (MFI?s) have become critical in encouraging entrepreneurship to reduce poverty in the developing world. However, MFI clientele often suffer from financial stress due to poor loan compliance. As such, we examine how loan compliance could be improved through the use of financial/business education interventions (facilitated by mobile apps) undertaken by MFIs. Conceptualizing financial literacy as a form of learning, we estimate the association between financial/business education app adoption and loan repayment behavior using individual-level data from a microfinance non-profit based in the Dominican Republic. We find that the adoption of a simple app has a strong association with positive behavior among borrowers. Specifically, the empirical analysis indicates a strong relationship between mobile app adoption and loan repayment compliance. Clients who downloaded the app are at least 60% less likely to allow a loan to go in arrears when compared to those who did not download. Furthermore, the effect does not vary across gender, business type, and other related variables. We conclude with positive implications for mobile technology adoption in developing economies, especially among the financially vulnerable.|
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