Mobile Internet, Information Frictions and Banking

This paper studies how mobile Internet technologies affect banking in low and middle-income countries. Combining comprehensive administrative data with two sources of quasi-experimental variation in the availability of the 3G network in Rwanda, we find that mobile Internet promotes the development of the banking sector, facilitating borrowers’ transition from microfinance to formal banks. This is due to a combination of better loan terms and reduced information frictions on the use of collateral. These results underscore the transformative role of digital connectivity in financial decision-making.

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