Consumer Protection in Digital Credit
This paper explores new approaches to address risks and problems in five areas:
- Disclosure of loan terms and conditions
- Marketing approaches to promote responsible borrowing
- Appropriate and tailored products to meet the needs of specific consumer segments
- Repayment and collections
- Credit reporting and information sharing
It draws from recent demonstrations by diverse East African lenders on how to identify potential solutions to common problems. The demonstrations used a range of methods, including lab testing with typical consumers that simulates the live borrowing experience, live testing by lenders to modify digital credit products and communications and then measure the resulting changes in consumer behavior, qualitative research, consumer surveys, and analysis of account-level data of digital borrowers. The demonstrations identified cost-effective, win-win practices that can influence product design and delivery to better protect borrowers while improving providers’ business viability.