Types of Research
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351a: Review of Digital Credit Products in India, Kenya, Nigeria, Tanzania, and Uganda
A “new wave” of digital credit products has entered the digital financial services (DFS) market in recent years. These products differ from traditional credit by offering loans to borrowers that can be applied for, approved, and disbursed remotely (often without any brick-and-mortar infrastructure), automatically (generally minimizing or eliminating person-to-person interaction), and instantly (often in less than 72 hours). Digital credit also increasingly considers creditworthiness by using alternative (nontraditional) data—ranging from mobile phone activity to utility payments and social media data—potentially allowing for loans to populations previously unable to access bank credit.
We conducted a review of digital credit products in India, Kenya, Nigeria, Tanzania, and Uganda, focusing on products established within the last 10 years that offer loans to individuals or small business owners (rather than groups or business entities). This report summarizes findings from a review of 68 digital credit products in these five countries, identifying common technology platforms, business models, and loan terms used. In addition, we outline major types of partnerships and stated customer segments of digital credit products, and summarize the types of alternative creditworthiness data used to score potential borrowers. We then present early information about digital credit default rates and potential risks to the consumer as the market develops.
Some features of digital credit products, such as interest rates and repayments lengths, differ by geography: Indian products, on average, typically offer longer repayment terms and lower interest rates than African products, potentially because they more frequently require links to bank accounts so may perceive lower risk in their loans. Due to limited loan volumes and performance data it is currently unclear how these digital credit products might impact borrowers and markets, but we find that the digital credit products reviewed often have relatively high interest rates and charge multiple fees, which may adversely affect borrowers if these are not clearly communicated. Most products require borrowers to provide social media and other personal information to receive loans, potentially supporting individuals without a formal credit history to access formal loans but raising privacy concerns. 15 of the products we identified specifically state that they target underserved populations such as low-income populations, but it is not clear what efforts they make to reach these populations or how successful they are in doing so. Many of the products are very recent (16 products are less than a year old or in the planning stage) so their uptake and impact among target populations remains to be seen, though some provider claims on client numbers suggest widespread use.
Explore more of the characteristics of the digital credit products we reviewed with our interactive data visualization.
351b: Digital Credit Regulation in Selected Countries in Africa and Asia
We conducted a targeted review of peer-reviewed and grey literature to identify specific regulatory concerns arising from the growth of digital credit products. We identified five regulatory issues related to digital credit that concern market conduct (data management and privacy, product disclosure, customer redress, consumer over-indebtedness, and rates and pricing) and five issues that concern systemic risk (licensing and reporting requirements, lending prohibition, regulatory sandboxes, capital requirements, and governance requirements). All of these issues concern financial services more broadly, but we find evidence of specific concerns related to characteristics of digital credit.
We found no regulatory documents from Africa or Asia that specifically mention "digital credit," but identified 20 regulatory documents from multiple African and Asian countries and jurisdictions that specifically target different aspects of the online and mobile credit and lending industries and that include regulations addressing the digital credit regulatory challenges highlighted in the literature. Existing regulations that do not specifically mention online/digital credit/lending may also be applied to address these digital credit regulatory issues, so a low number of regulatory documents does not mean a particular issue is not covered in country regulations—only that few new regulatory documents have emerged to address the particular potential concerns around digital credit.
While we found few documents with regulations addressing the ten current regulatory issues we identified and specifically mentioning digital/online credit/lending, countries may implement additional regulations or modify regulations if they determine existing regulations inadequately cover digital credit challenges. For example, more data management and privacy regulations may be needed to address the unique nature of using alternative data as criteria for financial decisions. Existing regulations may be amended to more clearly specify whether different types of digital credit business models and providers are covered by the terms of the regulations. Additionally, as more information is collected on the digital credit market (e.g., the amount of new debt created by digital credit products; the number and types of new consumer groups that access digital credit products), regulations may be developed to address issues that have yet to be identified.
Previous EPAR research considered how public good characteristics of different types of research and development (R&D) and the motivations of different providers of R&D funding affect the relative advantages of alternative funding sources. We summarized the public good characteristics of R&D investment for agriculture in general and for commodity and subsistence crops in particular, and hypothesized how these characteristics might be expected to affect public, private, or philanthropic funders’ investment decisions.
This paper builds on this previous research, using data on public sector investment in agricultural R&D in Sub-Saharan Africa. Drawing on data from FAOSTAT and the Agricultural Science and Technology Indicators (ASTI), we explore relationships between indicators of agricultural R&D investment and various factors hypothesized to influence public investment decisions, including national demographic and economic indicators and indicators of crop production and value. We analyze which factors appear to be most strongly associated with investment patterns in public agricultural R&D, and whether these patterns align with theoretical expectations of where the public sector would be incentivized to invest.
Our analysis for this project is not yet complete, but in the meantime we invite you to view our interactive data visualization which allows you to explore our data and some of our initial analysis. We have also uploaded a spreadsheet of the data used to produce this visualization.
This paper considers how public good characteristics of different types of research and development (R&D) and the motivations of different providers of R&D funding affect the relative advantages of alternative funding sources. We summarize the public good characteristics of R&D for agriculture in general and for commodity and subsistence crops in particular, as well as R&D for health in general and for neglected diseases in particular, with a focus on Sub-Saharan Africa and South Asia. Finally, we present rationales for which funders are predicted to fund which R&D types based on these funder and R&D characteristics. We then compile available statistics on funding for agricultural and health R&D from private, public and philanthropic sources, and compare trends in funding from these sources against expectations. We find private agricultural R&D spending focuses on commodity crops (as expected). However contrary to expectations we find public and philanthropic spending also goes largely towards these same crops rather than staples not targeted by private funds. For health R&D private funders similarly concentrate on diseases with higher potential financial returns. However unlike in agricultural R&D, in health R&D we observe some specialization across funders – especially for neglected diseases R&D - consistent with funders’ expected relative advantages.
Mobile technology is associated with a variety of positive development and social outcomes, and as a result reaching the “final frontier” of uncovered populations is an important policy issue. We use proprietary 2012 data on mobile coverage from Collins Bartholomew to estimate the proportion of the population living in areas without mobile coverage globally and in selected regions and countries, and use spatial analysis to identify where these populations are concentrated. We then compare our coverage estimates to data from previous years and estimates from the most recent literature to provide a picture of recent trends in coverage expansion, considering separately the trends for coverage of urban and rural populations. We find that mobile coverage expansion rates are slowing, as easier to reach urban populations in developing countries are now almost entirely covered and the remaining uncovered populations are more dispersed in rural areas and therefore more difficult and costly to reach. This analysis of mobile coverage trends was the focus of an initial report on mobile coverage estimates.
In a follow-up paper prepared for presentation at the 2016 APPAM International Conference, we investigate the assumption that levels of mobile network coverage are related to the degree of market liberalization at the country level. We find that there is no significant association between mobile coverage and two indicators of mobile-specific market liberalization, the number of mobile operators and the Herfindahl-Hirschman Index (HHI) for the mobile industry, but find a strong and positive significant association when using a measure of more general market liberalization, the Country Policy and Institutional Assessment (CPIA) Business Regulatory Environment rating. This result indicates that general market liberalization to promote competitiveness in both the mobile industry and in complementary industries may support mobile coverage expansion. We also find a strong negative relationship between mobile coverage and the rural proportion of the population, and a strong positive relationship between coverage and GNI per capita, highlighting the importance of demand side factors in coverage expansion. However, we cannot assess whether market liberalization alone will be sufficient to reach universal mobile coverage, especially for rural populations, without also increasing GNI per capita or subsidizing expansion costs to less profitable areas. Our findings have significant implications for policymakers, as without efforts to promote coverage expansion, the largely rural, agricultural, and low-income populations without mobile coverage are likely to be increasingly disadvantaged by their inability to access information and financial services, among other potential benefits of mobile technology.
In Sub-Saharan Africa, 12% of adults now report having a mobile money account, representing over a quarter of the share of those who have any kind of financial account at all. As mobile money expands, there is interest in how regulatory frameworks develop to support digital financial services (DFS) and also support broader financial inclusion. In theory, protecting consumers from risk, and ensuring that they have the information and understanding required to make informed decisions, may increase their confidence and trust in mobile money systems, leading to higher adoption and usage rates. However, consumer protection regulations may also carry certain trade-offs in terms of cost, usage, and innovation. The challenge, according to proponents of consumer protection, is to develop regulations that promote access and innovation, yet still offer an acceptable level of consumer protection. We review the literature on consumer protection institutions and regulatory documents for DFS (particularly mobile money) in 22 developing countries, and identify examples of specific consumer protection regulations relevant to mobile money in each country. Following an introduction to regulatory institutions and documents relating to consumer protection and DFS, we identify examples of regulations covering charges to consumers including fees, tariffs, and taxes for DFS in each country. We then review consumer protection regulations relating to costs from consumer losses resulting from system errors, erroneous transactions, agent misconduct, bankruptcy, and fraud. We further review regulations relating to transparency of provider terms and conditions, procedures for protecting consumers from harm, and complaints and dispute resolution.
We review the status and characteristics of 48 national identity programs and initiatives in 43 developing countries, and evaluate how these programs are being connected to—or used for—service provision. The identity programs we review are mainly government-issued national IDs. However, we also review other types of national identity programs with links to various services including voter cards, passports, and two programs targeting the poor and the banking population. Following a brief review of the roles of identity systems in development and recent identity system trends, we present an overview of the 48 national identity programs, including technical features (such as whether physical identities incorporate an electronic component or are embedded with biometric features), implementation status, population enrollment strategies, and coverage. We next review evidence of implementation challenges around accountability, privacy, data management, enrollment, coverage, cost, and harmonization of identity programs. Finally, we present the functional applications of national identity programs, reporting how these programs are linked with services in finance, health, agriculture, elections, and other areas, and analyzing whether particular identity program characteristics are associated with functional applications.
We review the literature on the status of interoperable payment schemes and regulations for financial services (particularly mobile money) in 46 developing countries, and identify examples of countries with interoperable mobile money schemes and/or regulations pertaining to mobile money and/or interoperability. Following a brief introduction to mobile money and interoperability, we present an overview of the status of mobile money in the 46 selected countries. We then review country regulations regarding both mobile money and payment systems as well as the form of these regulations (National Payment Law or Strategy, regulations, guidelines, etc.) for each country. We further discuss mobile money regulations, specifically regulations that pertain to bank-based versus non-bank based mobile money schemes, regulatory safeguards, and agent banking. In the final section we review regulations pertaining to interoperable mobile money services and outline where such regulations have been documented, highlighting countries with interoperable mobile money markets.
This report provides a summary of findings from six Financial Inclusion Insights (FII) data analysis reports conducted by various agencies for the Bill & Melinda Gates Foundation (BMGF). These reports investigate barriers to financial inclusion and use of digital financial services (DFS) in Bangladesh, India, Kenya, Nigeria, Pakistan, Tanzania, and Uganda. We compile comparable gender-specific statistics, summarize the authors’ findings to determine commonalities and differences across countries, and highlight gender-specific conclusions and recommendations provided in the studies.
This brief reviews the evidence of realized yield gains by smallholder farmers attributable to the use of high-quality seed and/or improved seed varieties. Our analysis suggests that in most cases, use of improved varieties and/or quality seed is associated with modest yield increases. In the sample of 395 trials reviewed, positive yield changes accompanied the use of improved variety or quality seed, on average, in 10 out of 12 crops, with rice and cassava as the two exceptions.
This desk study reports on the small-scale machinery sector in China and a selection of SSA countries: Ethiopia, Tanzania, Nigeria, Burkina Faso, and Uganda. The report is organized into three sections. Section 1 discusses the current state of small-scale agricultural machinery in SSA for crop and livestock production in each of the SSA countries identified. It also seeks to identify major areas of need in terms of agricultural mechanization and major constraints to agricultural machinery adoption, dissemination and maintenance. Section 2 focuses on the agricultural machinery sector in China and Chinese Africa relationships in agricultural development. It also identifies the major government players in the Chinese agricultural machinery sector. Section 3 is a “directory” of small-scale agricultural machinery manufactured in China with potential relevance for SSA smallholder farmers. We divide machines by function (e.g. threshing) although many Chinese machines are multi-function and can serve multiple purposes. We also note applicable crops, if listed by the manufacturers, and technical specifications as available.