Scholars in Kenya. Photo by Beauttah Wandera, 2017 CGAP Photo Contest Photo by Beauttah Wandera, 2017 CGAP Photo Contest

Lessons on Digital Consumer Credit from East Africa

Digital credit is fast, private and convenient. It also is potentially risky. Since 2012, millions in East Africa have borrowed small amounts with a quick tap on their mobile phones, making the region the first to achieve high penetration rates for digital consumer credit. Many in the financial inclusion community have supported digital consumer credit for its potential to easily help poor people meet their short-term household or business needs, while others have cautioned that it could lead to risky credit booms and over-indebtedness by those least equipped to manage the risk.

CGAP’s research has found that more needs to be done to protect consumers, and that a market slowdown in East Africa is needed to avoid a consumer credit bubble and ensure the market develops in a way that supports low-income users. A review of millions of loans and two large-scale customer surveys of digital borrowers reveal troubling issues with transparency and responsible lending that contribute to high delinquency rates, harming both consumers’ credit histories and lenders' business profits. But by employing some innovative approaches, CGAP’s experiments with six digital credit providers show there are ways to improve the customer experience, and to deliver better results for the business.

Blog

New research from Kenya and Tanzania reveals that digital credit is often used for consumption purposes and that delinquency and default rates are high, suggesting funders of digital credit markets should prioritize consumer protection.
Blog

Regulators can help ensure digital credit helps, rather than harms, poor customers by taking these steps.
 A farmer in Kenya uses her phone to aid her farming ventures. Photo Credit: Mwangi Kirubi, Kenya Photo Credit: Mwangi Kirubi, Kenya
Publication

CGAP’s experiments with a diverse range of financial service providers have found that innovative approaches to digital credit improve the products and are not only the right thing to do in protecting consumers, but often a wise business decision.
Photo Credit: C. Schubert (CCAFS) Photo Credit: C. Schubert (CCAFS)
Publication

To identify who is using digital credit, the purposes for which it is used, and the risks borrowers experience, CGAP, FSD Kenya, and FSD Tanzania undertook the first large-scale surveys dedicated to these topics.
Additional Resources
Infographic

To identify who is using digital credit, the purposes for which it is used, and the risks borrowers experience, CGAP, FSD Kenya, and FSD Tanzania undertook the first large-scale surveys dedicated to these topics. 
Slide Deck

Digital Consumer Credit: Four Ways Providers can Improve Customer Experience

CGAP partnered with six digital credit providers to identify opportunities to increase transparency over terms and conditions, improve loan repayments, manage credit risk, and help product sustainably. 

Blog

In a CGAP and M-Kopa pilot in Kenya, customers with greater control over their credit histories took up more credit and were more likely to pay it off in full.
Publication

This Brief provides an introduction to the fast-evolving landscape of digital credit and illustrates common features of this new digital finance offering.
Blog Series

This 2016 series shares early insights on digital credit, a fast-moving area in financial product innovation. In this series, we highlight the new Introduction to Digital Credit materials developed by CGAP, along with experiments and findings from case studies underway.