Welfare Effects of Digital Credit: A Randomized Evaluation in Nigeria

Digital loans, which provide short-term, high-interest credit via mobile phones, have exploded in popularity across low- and middle-income countries. This paper reports the results of a randomized evaluation of a digital loan product in Nigeria. Being randomly approved for a loan (among those who otherwise would have been denied) substantially increases subjective well-being after 3 months, but being randomly approved for a larger loan does not have any effect. Neither intervention significantly affects other measures of welfare, and we can rule out large effects—either positive or negative—on income and expenditures, resilience, and women’s economic empowerment.