Promoting effective disclosure of digital credit products among low income borrowers

SECTOR

Financial Inclusion

PROJECT TYPE

Lab experiments

DOI

Location

Kenya

BEHAVIORAL THEME

Active choice

OVERVIEW

How can disclosure be improved in digital credit?
Digital credit services have expanded rapidly in Kenya, enabling low-income consumers who were previously unserved to access credit. However, the impact has not been universally positive for customers, which raises several key questions on the impact of digital credit products:

How do consumer borrowing behaviors and the associated risks change with the ease of accessing credit through a mobile
phone?
What are the consumer protection risks, given how information on credit is presented to consumers?
How does the framing of messages about credit affect the likelihood of consumers repaying their loans?

THEMATIC AREAS

We found that the active choice both increased the number of users who engaged with the terms and conditions, but more importantly, led to improved loan selection and ultimate repayment. This may beg the question of whether mandatory disclosure, particularly for digital tools, may be as effective as prompting consumers to make an active choice.