Gains To Digitalization: Financial Services (Bharadwaj J&S: M-Shwari, Higgins (supermarkets)

Question 1

Problems with traditional microfinance (2)

Answer 1

Low take up
High admin costs (explained more in section 2: monitoring costs are fixed and high, using enforcement model etc!)

Question 2

Mobile banking is a solution: why is it beneficial for both supply and demand side

Answer 2

Lower costs for both customers and lenders e.g no physical branches so can offer better rates

Question 3

M-SHWARI - what do they base credit score/rating off (4)

Answer 3

M-PESA transactions
Airtime expenses
Airtime loans
Airtime transfers

Credit score gives loan limit accordingly which increases if loan is repaid

Question 4

How did Bharadwaj, Jack & Suri use this

Answer 4

Considered credit scores ranging between -9 to +10 , since similar and want to see the effects.

Question 5

Findings on loans and total loan amount.

Answer 5

Those with positive credit scores received more loans and total loan amount is worth more,

Those with negative credit scores get less loans, and loan amount is worth less.

Question 6

Findings on total debt

Answer 6

Those with positive credit scores have higher total debt (since are able to access more loans and of higher value and so debt higher)

Question 7

So was M-Shwari a complement or substitute in the market of loans

Answer 7

Complement.

Not a substitute since we would’ve seen a decrease in informal loans (since they wouldve been subbed)

Question 8

What happens to expenditure following credit score bandwidth cut-offs?

I.e from -9 to 10, to then looking at those with credit scores of -4 to 5.

Answer 8

No signficant changes in expenditure

Question 9

So adjusting the bandwidth had no significant changes to expenditure:

What is the only form of consumption that increased when switching to a bandwidth -4 to 5?

Answer 9

Education.

Question 10

So was access to digital credit through M-Shwarma a success?

3 reasons for yes

1 for no

Answer 10

Yes - Large take up around the cutoff (34% of eligible take it)

Complement not substitute: thus a true expansion!

Increased education consumption for the -4 to +5 BW

No
No effects on overall consumption, assets or employment

Question 11

Evaluation of research design of BJS

Answer 11

We only considered a small bandwidth. (Scored of -9 to +10)

Question 12

Higgins - research question

Answer 12

See if coordination failures constrain financial technology adoption.

Question 13

How did they study this

Answer 13

Looked at Mexico distributing 1M debit cards.

Why? Point of sale machines were not being adopted, so the government flooded market by debit cards

Question 14

Findings: Did POS adoption increase for supermarkets and corner shops

Answer 14

Not supermarkets (perhaps already had it)
Corner shops with POS increased

Question 15

Findings for spillover to other consumers (I.e adoption of debit cards)

Answer 15

Increased - government issued 1M debit cards; not entire population, so people see others using debit cards as form of payment, so they also demand debit cards.

Question 16

Results: change in consumption in corner shops and supermarkets by income quintile

Answer 16

The richest increase their consumption in corner shops.

The richest decrease their consumption in supermarkets

Question 17

Results summary

Answer 17

Over half of total consumer gains are spillovers (tech adoption), implying indirect network externalities are huge.

(People see over people mass adopting debit cards, so copy!)