Promises and pitfalls of digital credit: Empirical evidence from Kenya.

Digital credit is a recent innovation that raises hopes of improving credit access in developing countries. However, up until now, empirical research on the extent to which digital credit actually reaches people who are otherwise excluded from conventional credit markets and whether increased credit access is sustainable or threatened by high default and blacklisting rates is very scarce. Using representative data from Kenya, this article shows that digital credit increases borrowing opportunities, including for people less likely to otherwise have credit access in the conventional credit markets. However, we find that digital credit borrowing is also responsible for 90% of all blacklistings, which is partially driven by higher default rates in the digital credit market but also by a higher probability that digital credit defaults lead to blacklisting of the borrower, compared to defaults in other credit markets.

A machine learning approach to the digitalization of bank customers: Evidence from random and causal forests.

Understanding the digital jump of bank customers is key to design strategies to bring on board and keep online users, as well as to explain the increasing competition from new providers of financial services (such as BigTech and FinTech). This paper employs a machine learning approach to examine the digitalization process of bank customers using a comprehensive consumer finance survey. By employing a set of algorithms (random forests, conditional inference trees and causal forests) this paper identities the features predicting bank customers' digitalization process, illustrates the sequence of consumers' decision-making actions and explores the existence of causal relationships in the digitalization process. Random forests are found to provide the highest performance-they accurately predict 88.41% of bank customers' online banking adoption and usage decisions. We find that the adoption of digital banking services begins with information-based services (e.g., checking account balance), conditional on the awareness of the range of online services by customers, and then is followed by transactional services (e.g., online/mobile money transfer). The diversification of the use of online channels is explained by the consciousness about the range of services available and the safety perception. A certain degree of complementarity between bank and non-bank digital channels is also found. The treatment effect estimations of the causal forest algorithms confirm causality of the identified explanatory factors. These results suggest that banks should address the digital transformation of their customers by segmenting them according to their revealed preferences and offering them personalized digital services. Additionally, policymakers should promote financial digitalization, designing policies oriented towards making consumers aware of the range of online services available.

What explains low adoption of digital payment technologies? Evidence from small-scale merchants in Jaipur, India.

The availability of digital payment technologies (such as internet banking, mobile money, and credit/debit cards) has rapidly increased in the developing world, and is a cornerstone for financial inclusion initiatives in developing countries. Despite significant efforts to promote digital payments, rates of adoption remain modest in some low-income countries. In particular, the rate of adoption in India remains low despite significant efforts to promote adoption. In this paper, we consider possible reasons for the low rates of adoption among merchants in Jaipur, India with small fixed-location store enterprises. Using survey data for 1,003 merchants, we find little evidence that supply-side barriers to obtaining necessary infrastructure or meeting prerequisite requirements to adopt digital payments explain the low level of adoption. Merchants are able to obtain infrastructure to transact digitally (such as bank accounts and smart phones), fees on digital platforms are affordable, and merchants are sufficiently literate to be able to use digital payment systems. We conclude that adoption is both feasible and inexpensive. Therefore, low rates of adoption do not appear to be the result of supply-side barriers, but due rather to demand-side factors or taxes. We find direct evidence of such demand-side factors, such as a perceived lack of customers wanting to pay digitally, and concerns that records of mobile payments might increase tax liability. Our results thus suggest that simply lowering the costs associated with adopting these technologies is unlikely to be successful in increasing adoption of digital payments.

User-centred web design, usability and user satisfaction: The case of online banking websites in Iran.

The relationship of Web design attributes (personalisation, structure, navigation, layout, search and performance) and users' personal characteristics to website usability and user satisfaction was investigated among 798 online banking users in Iran. The design and usability of the evaluated websites were not satisfactory from the users' perspectives. Multivariate regression models indicated that Web layout and performance were the main predictors of website usability, while personal characteristics including gender, age and Web usage experience of users had no effect. User satisfaction was also influenced only by the Web design attributes (particularly Web structure) and not by the personal characteristics of the users. There was also a significant relationship between website usability and user satisfaction. The findings suggest that the website designers should focus more on the Web design attributes (particularly Web layout and structure), regardless of the personal characteristics of their users, to improve the usability and user satisfaction of websites.

The influence of number line estimation precision and numeracy on risky financial decision making.

This study examined whether different aspects of mathematical proficiency influence one's ability to make adaptive financial decisions. "Numeracy" refers to the ability to process numerical and probabilistic information and is commonly reported as an important factor which contributes to financial decision-making ability. The precision of mental number representation (MNR), measured with the number line estimation (NLE) task has been reported to be another critical factor. This study aimed to examine the contribution of these mathematical proficiencies while controlling for the influence of fluid intelligence, math anxiety and personality factors. In our decision-making task, participants chose between two options offering probabilistic monetary gain or loss. Sensitivity to expected value was measured as an index for the ability to discriminate between optimal versus suboptimal options. Partial correlation and hierarchical regression analyses revealed that NLE precision better explained EV sensitivity compared to numeracy, after controlling for all covariates. These results suggest that individuals with more precise MNR are capable of making more rational financial decisions. We also propose that the measurement of "numeracy," which is commonly used interchangeably with general mathematical proficiency, should include more diverse aspects of mathematical cognition including basic understanding of number magnitude.

Microfinance Participation, Control Over Resources, and Justification of IPV: Results From a Nationally Representative Sample of Women.

A high percentage of men and women are purported to justify intimate partner violence (IPV) in countries that are steeped in patriarchy even in the presence of programs such as microfinance that aim to address gender equity. This article examines two assertions that emerge from the literature on microfinance and its potential for positive outcomes for women who participate in it: (a) Microfinance participation is associated with reduced justification of IPV, and (b) microfinance participants with control over their own resources are less likely to justify IPV when compared with microfinance participants who do not have control over their resources. Couples data from a nationally representative survey, the Bangladesh Demographic and Health Survey, were used in the present study. Propensity score matching and logistic regression analyses were conducted to reveal that (a) microfinance participation was not associated with justification of IPV and that (b) women who participated in microfinance were less likely to justify IPV when they had no control over their resources. Implications for practitioners and policymakers are discussed.

Expanding access to primary healthcare for women through a microfinance institution: A case study from rural Guatemala.

The utilization of existing social networks is increasingly being recognized as a powerful strategy for delivering healthcare services to underserved populations in low- and middle-income countries. In Guatemala, multiple barriers prevent access to healthcare services for rural and indigenous populations, and strategies for delivering healthcare in more efficient ways are needed. The case study we describe here is a unique collaboration between a microfinance institution (Friendship Bridge) and a primary care organization (Wuqu' Kawoq | Maya Health Alliance) to scale up healthcare through an existing lending-borrowing social network. The program provides primary care services to female clients of Friendship Bridge in rural areas of Guatemala, with nurses working as frontline primary care providers, providing door-to-door healthcare services. Over the first 22 months of the project, we have reached over 3500 of Friendship Bridge's clients, with overall high acceptance of services. All clinical documentation and program monitoring and evaluation are done through audit trails within an electronical medical record system, which improves efficiency and lowers the associated time and resources costs. We utilize quality improvement methodologies to aid in decision making and programmatic adjustments scale up. These strategies have allowed us to expand services rapidly under challenging geographic and logistical constraints, while concurrently iteratively improving staff training and supervision, clinical care, and client engagement processes.

Cyclic motifs in the Sardex monetary network.

From decentralized banking systems to digital community currencies, the way humans perceive and use money is changing1-3, thus creating novel opportunities for solving important economic and social problems. Here, we study Sardex, a fast-growing community currency in Sardinia (involving 1,477 businesses arrayed in a network with 48,170 transactions) using network analysis to shed light on its operation. Based on our experience with its day-to-day operations, we propose performance metrics tailored for Sardex but also to similar economic systems, introduce criteria for identifying prominent economic actors and investigate the interplay between network structure and economic robustness. Leveraging new methods for quantifying network 'cyclic density' and 'k-cycle centrality,' we show that geodesic transaction cycles, where money flows in a circle through the network, are prevalent and that certain nodes have a pivotal role in them. We analyse the transactions within cycles and find that the economic turnover of the involved firms is higher, and that excessive currency and debt accumulations are lower. We also measure a similar, but secondary, effect for nodes and edges that serve as intermediaries to many transactions. These metrics are strong indicators of the success of such mutual credit systems at individual and collective levels.

Rhizarthrosis in banknote processing workers: a retrospective cohort study.

BACKGROUND: Rhizarthrosis, or osteoarthritis of the base of the thumb, is a common condition affecting 10-30% of the population over the age of 60. Whether it is an occupational disease has been the subject of debate as epidemiological studies on the correlation between physical stress and the presence of rhizarthrosis have shown conflicting results. AIMS: To study the correlation between the prevalence of rhizarthrosis and the time spent by employees manually processing banknotes at the National Bank of Belgium (NBB). METHODS: We followed NBB employees currently or previously holding job titles involving the manual or automated processing of banknotes. Each participant's job history was carefully reconstructed and the number of months holding certain job titles determined. Each participant was clinically and radiologically examined for the presence of rhizarthrosis in both hands. Its presence was scored by a combination of clinical and radiological criteria. RESULTS: There were 195 participants. The prevalence of rhizarthrosis was 27% in women (mean age: 52.3 ± 4.4 years) and 17% in men (mean age: 53.2). The odds ratio (OR) for rhizarthrosis after 10 years' full-time overall exposure was significantly higher [OR 10 years: 1.53 (1.03-2.28)]. However, one particular job, 'manual counting', described by participants as highly straining and severely taxing on the thumbs, did not show a significantly higher prevalence of rhizarthrosis. CONCLUSIONS: Our study confirmed the correlation between the presence of rhizarthrosis and age, gender and general manual labour, in particular banknote processing, but found no link with one specific job-manual counting.

A framework for analyzing contagion in assortative banking networks.

We introduce a probabilistic framework that represents stylized banking networks with the aim of predicting the size of contagion events. Most previous work on random financial networks assumes independent connections between banks, whereas our framework explicitly allows for (dis)assortative edge probabilities (i.e., a tendency for small banks to link to large banks). We analyze default cascades triggered by shocking the network and find that the cascade can be understood as an explicit iterated mapping on a set of edge probabilities that converges to a fixed point. We derive a cascade condition, analogous to the basic reproduction number R0 in epidemic modelling, that characterizes whether or not a single initially defaulted bank can trigger a cascade that extends to a finite fraction of the infinite network. This cascade condition is an easily computed measure of the systemic risk inherent in a given banking network topology. We use percolation theory for random networks to derive a formula for the frequency of global cascades. These analytical results are shown to provide limited quantitative agreement with Monte Carlo simulation studies of finite-sized networks. We show that edge-assortativity, the propensity of nodes to connect to similar nodes, can have a strong effect on the level of systemic risk as measured by the cascade condition. However, the effect of assortativity on systemic risk is subtle, and we propose a simple graph theoretic quantity, which we call the graph-assortativity coefficient, that can be used to assess systemic risk.

The Accounting Network: How Financial Institutions React to Systemic Crisis.

The role of Network Theory in the study of the financial crisis has been widely spotted in the latest years. It has been shown how the network topology and the dynamics running on top of it can trigger the outbreak of large systemic crisis. Following this methodological perspective we introduce here the Accounting Network, i.e. the network we can extract through vector similarities techniques from companies' financial statements. We build the Accounting Network on a large database of worldwide banks in the period 2001-2013, covering the onset of the global financial crisis of mid-2007. After a careful data cleaning, we apply a quality check in the construction of the network, introducing a parameter (the Quality Ratio) capable of trading off the size of the sample (coverage) and the representativeness of the financial statements (accuracy). We compute several basic network statistics and check, with the Louvain community detection algorithm, for emerging communities of banks. Remarkably enough sensible regional aggregations show up with the Japanese and the US clusters dominating the community structure, although the presence of a geographically mixed community points to a gradual convergence of banks into similar supranational practices. Finally, a Principal Component Analysis procedure reveals the main economic components that influence communities' heterogeneity. Even using the most basic vector similarity hypotheses on the composition of the financial statements, the signature of the financial crisis clearly arises across the years around 2008. We finally discuss how the Accounting Networks can be improved to reflect the best practices in the financial statement analysis.

The unaccountable risks of LIBOR.

One of the on-going consequences of recent financial crises seems to be that the conventional 'anchor' measures of global finance (such as the US dollar, treasury bonds and AAA rated securities) are no longer playing the anchoring role once believed of them. LIBOR now needs to be added to this list and not just because it has been tarnished by illegal practices, but because it is looking increasingly surpassed by financial market practices. LIBOR was believed to provide a risk-free rate of interest, but has been revealed to be risk-laden. Moreover, LIBOR is a measure of the costs of borrowing, whilst market concern is increasingly with measures of interest rate volatility. This paper looks at why, in the context of crisis, financial market focus on interest rates is turning towards other benchmarks, notably the overnight indexed swap (OIS) market, and what this shift might be telling us about the anchoring requirements of global financial markets.

The Cashless Clinic: Acceptability and Benefits of Mobile Money in Kenya's Health Sector.

Mobile payment acceptance in healthcare is a relatively new area of research, under explored when compared to related areas of research such as mobile technology for health information and communication. The objectives of this study were to find out the effects of Safaricom's Lipa na M-PESA (LNM) use on clinic administrative costs and revenue, and to study the uptake and acceptability of LNM by patients. The study researched mobile payment acceptability by turning a clinic to be completely cashless for a six-week period. Baseline data was collected to gauge the effects of mobile payment on administrative costs and revenue. Surveys and in-depth interviews were carried out to assess the acceptability of mobile payment among staff and patients. Findings from this experiment demonstrate that mobile technology is acceptable when it is perceived as useful and more convenient to use.

Beyond qualitative and subjective techniques to assess usability of banking interfaces for senior citizens.

Senior citizens can benefit from banking services but the lack of usability hampers this possibility. New approaches based on physiological response, eye tracking and user movement analysis can provide more information during interface interaction. This research shows the differences depending on user knowledge and use of technology, gender and type of interface.