Tiny Loans, Big Questions: Client Protection in Mobile Consumer Credit

In just a few years, through models such as M-Shwari, M-Pawa, Tala and Airtel Money, tens of millions of people have borrowed tiny amounts over their phones. These services represent an enormous increase in financial inclusion. They address a fundamental consumer need previously unavailable to lower income people from the formal financial system: the need for very short-term money management tools to cope with income and expense volatility. While these instant, small mobile consumer loans are in many ways a boon, they also contain, and in some cases heighten, risks for their users. This Brief enumerates and discusses emerging consumer risks posed by these instant small mobile loan products, using the Client Protection Principles as an organizing framework. The authors hope and intend that this Brief will assist participants in the mobile financial sector to articulate and build a consensus about responsible practices, though this framework should not limit the discussion.