Can Digital Technologies Reshape Rural Microfinance? Implications for Credit, Insurance, and Saving

Elinor Benami, Michael R Carter

Abstract: To serve rural communities, microfinance must contend with the triple challenges of isolation, small scale transactions, and risk. These challenges result in information asymmetries and transaction costs that render markets for financial services imperfect, costly, or missing. Grounded in this theoretical framework, this paper examines how emerging digital technologies (e.g., mobile money, digital credit scoring, and earth observation) can reshape rural markets for savings, credit and insurance services. While our synthesis of the literature suggests reason for hope in all three domains; evaluating, monitoring, and regulating the emerging digital technologies will be critical for ensuring that the resulting rural financial system is more efficient and equitable than its predecessor.