Improving Women’s Access to Digital Mobile Technology in Sub-Saharan Africa

Mobile phones can enable economic and social empowerment by lowering communication costs and reducing information frictions. Yet, gender gaps in smartphone ownership in sub-Saharan Africa are substantial. The high up-front cost of smartphone devices remains a primary barrier, especially for women. Credit is one way to overcome this barrier, but it is often difficult for lenders to extend credit to low-income borrowers, who lack collateral and therefore pose a risk to default on their loans. Recent research indicates that a “pay-as-you-go” (PAYG) structure -- which relies on technology that locks the asset being lent in the event of non-payment -- could be an effective means of lending to the large numbers in low- and middle-income countries with no credit history. However, the rigid nature of these contracts may pose problems, especially when loans finance income-generating assets like smartphones, and could be especially challenging for groups earning irregular income that is subject to shocks. Working with a large asset-financing platform providing PAYG smartphones to individuals in Kenya, we conduct two randomized controlled trials to assess (a) whether offering payment flexibility enhances digital inclusion and raises economic wellbeing and (b) how marketing under these flexible contracts affects selection. In the first experiment, we randomly surprise existing customers into one of 3 experimental contracts offering different types of flexibility and repayment incentive; this lets us estimate the impact of the new contracts holding selection constant. In the second experiment, we assess selection by comparing borrower demographics and repayment outcomes among those surprised with the experimental contracts versus those marketed the contracts. Findings will inform both product design for financial service providers and consumer protection policies amid the rapid growth of digital credit markets in Sub-Saharan Africa.