The Challenge
In the new era of digitization, the rapid proliferation of digital banking solutions will have important impacts on global financial inclusion. Hundreds of millions of people can now save, borrow, and make payments directly through their mobile phones rather than through a brick-and-mortar financial institution. Due to the large number of unbanked individuals with access to mobile phone networks, digital credit has the potential to dramatically change usage patterns and scale well beyond traditional channels of credit in developing countries, including microcredit. Accordingly, there is much to learn about the potential impacts - both positive and negative- of this burgeoning product category on the poor.
The unbanked and under-banked often lack traditional collateral and the formal records needed for traditional credit scores, creating a large potential market for lending (and borrowing). Digital credit providers often circumvent this information gap by leveraging alternative sources of data. The rapid growth of digital credit also raises important questions about consumer protection. As digital credit products have proliferated, so too have reports of predatory behaviors by some lenders. In unregulated or loosely regulated markets, the use of digital credit may pose serious risks to consumers, including over-indebtedness, manipulation, identity theft, accidental leakages, and fraud.
A knowledge gap exists in understanding how these digital credit products alleviate (or entrench) poverty. Given the proliferation of digital credit models in low-income environments, a rigorous evidence base is needed to better understand this sector at scale.
The unbanked and under-banked often lack traditional collateral and the formal records needed for traditional credit scores, creating a large potential market for lending (and borrowing). Digital credit providers often circumvent this information gap by leveraging alternative sources of data. The rapid growth of digital credit also raises important questions about consumer protection. As digital credit products have proliferated, so too have reports of predatory behaviors by some lenders. In unregulated or loosely regulated markets, the use of digital credit may pose serious risks to consumers, including over-indebtedness, manipulation, identity theft, accidental leakages, and fraud.
A knowledge gap exists in understanding how these digital credit products alleviate (or entrench) poverty. Given the proliferation of digital credit models in low-income environments, a rigorous evidence base is needed to better understand this sector at scale.
Our Mission
The DCO aims to address this knowledge gap. Managed by the Center for Effective Global Action, a leading global development impact research center based at the University of California, Berkeley, the DCO functions as an applied research network charged with answering key questions related to the impacts—both positive and negative—of digital credit products in emerging markets, as well as the effectiveness of promising approaches to maximizing benefits while minimizing risks to low-income consumers. The DCO will rigorously examine and develop an evidence base on the delivery, impact, and regulation of digital credit. The evidence generated through the DCO will compliment work by other research centers to inform advocacy and decision-making in this space.
Our Strategic Goals
The primary function of the DCO is to fund a coordinated set of studies that explore the effectiveness and welfare impacts of digital credit products and consumer protection mechanisms through qualitative pilot work, randomized trials, survey data collection, and advanced data analytics.
Strategic goals include:
Strategic goals include:
- Create a strong network of private sector, research and policy partners in the digital credit arena
- Generate a coordinated portfolio of studies on the impacts of digital credit and optimal consumer protection mechanisms
- Arm policymakers with a set of proven indicators and actionable insights needed to engage in evidence-based decision making and policy creation
Funding Research
The DCO will fund a coordinated set of research studies that are directly relevant to the work of policymakers and practitioners in the digital credit sector.
The primary function of the DCO is to fund a suite of closely coordinated research studies, carried out by CEGA affiliates and their collaborators and in cooperation with a range of policy, regulatory, and industry partners in developing countries. The majority of funded studies will be full-scale, rigorous impact evaluations, and the remainder will be early-stage pilot projects. Importantly, studies will use standardized survey modules to collect data on a range of financial health and development outcomes, allowing the DCO to generate insights that are highly robust and generalizable.
In 2017, the DCO awarded 13 grants to fund five full-scale studies and eight pilot projects. Check out the awardees here!
The primary function of the DCO is to fund a suite of closely coordinated research studies, carried out by CEGA affiliates and their collaborators and in cooperation with a range of policy, regulatory, and industry partners in developing countries. The majority of funded studies will be full-scale, rigorous impact evaluations, and the remainder will be early-stage pilot projects. Importantly, studies will use standardized survey modules to collect data on a range of financial health and development outcomes, allowing the DCO to generate insights that are highly robust and generalizable.
In 2017, the DCO awarded 13 grants to fund five full-scale studies and eight pilot projects. Check out the awardees here!
Sharing Evidence and Lessons Learned
The DCO leadership team works closely with key partners to clearly communicate policy lessons to decision-makers. A publicly available final synthesis paper will harmonize evidence across all ten studies, offering a sum of consolidated insights and valuable lessons learned. As research findings become available, they will be shared on this website and accompanying blog. Workshops, round table discussions, and policy conferences will also be held to offer a space where researchers can share and discuss more technical findings with an audience.
The Team
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Joshua Blumenstock, DCO Scientific Director
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Jonathan Robinson, DCO Scientific Director
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Joshua Blumenstock is an Assistant Professor at the UC Berkeley School of Information. His research develops theory and methods for the analysis of large-scale behavioral data, with a focus on how such data can be used to better understand poverty and economic development. Joshua was previously on the faculty at the University of Washington, where he founded and co-directed the Data Science and Analytics Lab. He has a Ph.D. in Information Science and a M.A. in Economics from U.C. Berkeley, and Bachelor’s degrees in Computer Science and Physics from Wesleyan University. He is a recipient of the Intel Faculty Early Career Honor, a Gates Millennium Grand Challenge award, a Google Faculty Research Award, and a former fellow of the Thomas J. Watson Foundation and the Harvard Institutes of Medicine.
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Jonathan Robinson is an Associate Professor in the Economics Department at the University of California, Santa Cruz. He is also a research associate at the NBER, and an affiliate at BREAD, CEGA, IPA and J-PAL. He has been involved in research in financial access for over 10 years, including studies to quantify the effect of providing bank accounts to previously unbanked households in Kenya, Malawi, Uganda and Chile. His research also includes studies which examine constraints to technology adoption in agriculture, and several projects about the effect that uninsured risk has on economic decision making. He received his Bachelor’s degrees in Economics and Political Science from MIT, and his Ph.D. in Economics from Princeton.
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Carson Christiano, Deputy Director
Center for Effective Global Action (CEGA) |
Natasha Beale, Program Manager
Center for Effective Global Action (CEGA) |
Ale Wall, Senior Program Associate
Center for Effective Global Action (CEGA) |
Eilin Francis, DCO Grad Student Researcher
PhD Candidate, Department of Economics UC Santa Cruz |
