Mobile Internet, Collateral, and Banking

IMF Working Papers, March 29, 2024

Source details

Authors: Angelo D’Andrea, Patrick Hitayezu, Kangni R Kpodar, Nicola Limodio, Andrea F Presbitero
Published: March 29, 2024
Series: IMF Working Papers
DOI: https://doi.org/10.5089/9798400270734.001

Combining administrative data on credit, internet penetration and a land reform in Rwanda, the paper shows that the complementarity between technology and law can overcome financial frictions.
Leveraging quasi-experimental variation in 3G availability from lightning strikes and incidental coverage, mobile connectivity steers borrowers from microfinance to commercial banks and improves loan terms.
3G internet facilitates the acquisition of land titles from the reform, which are used as collateral for bank loans and mortgages.
The availability of collateral mediates 35% of the overall effect of mobile internet on credit.
The availability of collateral mediates 80% of the effect of mobile internet for collateralized loans.

Data sources combined: administrative credit records, measures of internet penetration (3G availability), and details of a land reform in Rwanda.
Identification strategy: quasi-experimental variation in 3G availability driven by lightning strikes and incidental coverage.

Mechanism emphasized: mobile internet reduces frictions by enabling access to land titles produced by the reform; land titles serve as collateral for bank lending and mortgages.
Outcomes observed:
- Reallocation of borrowers from microfinance institutions to commercial banks.
- Improvement in loan terms associated with increased mobile connectivity and collateralization.

Policies that enhance mobile internet connectivity can interact with legal reforms (e.g., land titling) to expand access to bank credit and improve loan terms.
Legal infrastructure that increases availability of collateral (land titles) magnifies the credit-enhancing effects of mobile internet.