Microfinance meets digital lenders
Microfinance and microcredit appear on 35 recent papers, and only 2 of them carry a regulation, digital, fintech or competition keyword. App-based lenders now compete with microfinance institutions in Africa and Asia, and several countries have capped rates. Do borrowers end up with cheaper credit, or more of it?
What prompted this#
Since October 2025, 35 papers carry a microfinance or microcredit keyword (18 in finance journals, 10 in economics); "microfinance" appears on 17 and "microfinance institutions" on 14. Only 2 of the 35 also carry an interest-rate-cap, regulation, digital, fintech, competition or over-indebtedness keyword. Financial inclusion as a whole is a large topic, so the gap is specific to how microfinance institutions compete now.
Questions#
- When digital lenders enter a market, do microfinance institutions lose their best borrowers, cut rates or move up-market?
- Do interest rate caps push lenders out of rural areas, as earlier caps did, or do digital lenders' lower costs change that?
- Do borrowers with both app loans and microfinance loans become over-indebted?
Data that could help#
Microfinance institution financials (the MIX Market successor datasets), credit bureau data where digital lenders report, and the dates of rate caps by country.
Next step#
Compare microfinance institutions' loan growth and portfolio quality in Kenya, where digital lending is widespread, before and after the 2021 digital credit regulations.