Consumer Protection in Digital Credit

R. Mazer & K. McKee | CGAP

Digitally delivered credit is quickly expanding in emerging markets. “Digital credit” refers to credit products—including digital payments products such as mobile money—that are delivered fully via digital channels, such as mobile phones and the internet. These business models are driven by strong customer demand, lower operating costs, and the greater reach of the instant, automated, and remote lending methodology. The convenience and speed of digital credit are well matched to urgent and unanticipated needs, such as a late-night emergency visit to the hospital or working capital for the quick-turnover, high-margin economic activities common for microenterprises. Yet the very attributes of digital credit—instant, automated, and remote— create consumer protection risks that are distinct from those of more traditional consumer and microenterprise credit models. This paper explores new approaches to address risks and problems in five areas: • Disclosure of loan terms and conditions; • Marketing approaches to promote responsible borrowing; • Appropriate and tailored products to meet the needs of specific consumer segments; • Repayment and collections; • Credit reporting and information sharing.

Access to Finance, Mobile Banking
Year of publication:
External Document: