Mobile Internet, Collateral and Banking

Abstract

Combining administrative data on credit, internet penetration and a land reform in Rwanda, this paper offers evidence on the complementarity between technology, law and finance. Leveraging quasi-experimental variation in 3G availability from lightning strikes and incidental coverage, we show that mobile connectivity steers borrowers from microfinance to commercial banks and improves loan terms. These effects are partly due to the role of 3G internet in facilitating the acquisition of land titles from the reform, used as a collateral for bank loans and mortgages. We quantify that the collateral’s availability mediates 35% of the overall effect of mobile Internet on credit and 80% for collateralized loans.

Presented by Nicola Limodio