Innovating Microcredit: How Fintechs Change the Field

23 Pages Posted: 14 Jul 2020

See all articles by Emmanuel Camelo

Emmanuel Camelo

Getulio Vargas Foundation (FGV)

Layla Mendes

Getulio Vargas Foundation (FGV)

Rodrigo Leite

COPPEAD Graduate School of Business

Date Written: June 20, 2020

Abstract

Usually screening in microcredit is a very opaque process, because borrowers seldom have verifiable information or collateral. We explore the relationship between traditional screening variables and a new screening variable (Job Experience) for a Brazilian fintech microcredit firm. Unlike traditional microcredit providers in Latin America, this firm developed a strategy that targets poor workers by using the clients' job contracts as collateral and by implementing a 100% online application system with a low level of bureaucracy. A total of 911 contracts were analyzed. Unlike previous studies, we show that the main variable used for screening is Job Experience: borrowers with longer experience in their current jobs received larger loans with lower interest rates while maintaining smaller delinquency. Thus, we show that financial technology can change the field of microcredit.

Keywords: microcredit, fintech, interest rates, default, screening

JEL Classification: G21, G29

Suggested Citation

Camelo, Emmanuel and Mendes, Layla and Leite, Rodrigo, Innovating Microcredit: How Fintechs Change the Field (June 20, 2020). Available at SSRN: https://ssrn.com/abstract=3610918 or http://dx.doi.org/10.2139/ssrn.3610918

Emmanuel Camelo

Getulio Vargas Foundation (FGV) ( email )

R. Dr. Neto de Araujo 320 cj 1307
Rio de Janeiro, Rio de Janeiro 22250-900
Brazil

Layla Mendes (Contact Author)

Getulio Vargas Foundation (FGV) ( email )

Praia de Botafogo, 190
Rio de Janeiro, Rio de Janeiro 22250-900
Brazil
+55 21 99904-2229 (Phone)

Rodrigo Leite

COPPEAD Graduate School of Business ( email )

Rua Pascoal Lemme
355 - Cidade Universitária
Rio de Janeiro, Rio de Janeiro 21941-918
Brazil

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
32
Abstract Views
236
PlumX Metrics