Filling the Gap: Digital Credit and Financial Inclusion

IMF Working Papers, August 7, 2020

Source details

Research question: Can fintech credit fill the credit gap in the consumer and business segments?
Focus: marketplace lending as an important component of fintech credit.
Data scope: data for 109 countries from 2015 to 2017.
Authors: Majid Bazarbash, Kimberly Beaton.
Publication context: IMF Working Paper No. 2020/150, Volume 2020, Issue 150, Pages: 30.

Marketplace lending to consumers grows in countries where financial depth declines, indicating fintech credit can fill the credit gap left by traditional lenders.
The consumer-segment result is particularly strong in low-income countries.
In the business segment, marketplace lending expands where financial efficiency declines.
Overall implication: low-income countries take advantage of the fintech credit opportunity in the consumer segment but face important challenges in the business segment.

Cross-country analysis covering 109 countries.
Time period analyzed: 2015 to 2017.
Emphasis on relationships between fintech (marketplace) lending to businesses and consumers and various aspects of financial development (financial depth and financial efficiency).

Subject areas: Banking, Credit, Financial inclusion, Financial markets, Financial sector development, Fintech, Money, Peer-to-peer lending, Technology.
Keywords (as provided): Asia and Pacific, balance sheet lending, bank lending, composition of marketplace lending, consumer lending, consumer lending from Lending Club, Credit, cross-country difference, development of marketplace lending, Digital Credit, Europe, finance activity, Financial inclusion, Financial sector development, Fintech, fintech credit, fintech lending, Global, lending development, lending to GDP, marketplace lending, Middle East and Central Asia, Peer-to-peer lending, Western Hemisphere, WP.

Fintech marketplace lending can serve as a substitute for traditional lending where financial depth is declining, particularly supporting consumer access to credit in low-income countries.
Expansion of marketplace lending for businesses appears linked to declines in financial efficiency, suggesting that addressing inefficiencies in the traditional financial sector may be important for broader fintech adoption in the business segment.
Policymakers in low-income countries may consider enabling fintech credit growth to support consumer credit inclusion while addressing structural challenges in the business lending environment to realize fintech benefits for firms.

Filling the Gap: Digital Credit and Financial Inclusion — Majid Bazarbash, Kimberly Beaton; August 7, 2020.