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Innovations for Poverty Action (IPA) 2014

Access to Credit and the Scale-Up of Biometric Technology in Malawi

Credit Biometric Identification

Innovations for Poverty Action

Titre : Access to Credit and the Scale-Up of Biometric Technology in Malawi

Région /Pays : Malawi

Date : 2014- 2016

Credit enables small-scale farmers and business owners in developing countries to finance crucial inputs such as fertilizer, improved seeds, and business assets. However, formal lenders may be discouraged from lending to the rural poor due to difficulties in ensuring repayment from borrowers who lack adequate collateral or verifiable credit histories. Obtaining reliable information on individuals’ credit history can be difficult in countries without unique identification systems, like social security numbers or government-issued photo identification. Borrowers can avoid sanction for past default by simply applying for new loans under different names or from different institutions. Biometric identification, such as fingerprints, can help lenders identify unique borrowers, verify credit histories, and enforce loan repayment, which in turn can make it cheaper for banks to extend credit to the poor.

Introducing biometric identification substantially increased repayment rates amongst Malawian farmers with the highest risk of default. Researchers are now examining the large-scale impact of biometric technology on repayment and borrower behavior at microfinance institutions across the country.

Researchers will measure the large-scale impacts of fingerprinting on lending and borrowing across Malawi in partnership with four MFIs, covering over 50 percent of microfinance borrowers in 27 out of 28 districts.
Two hundred and thirty-six loan officers from the participating MFIs will be randomly assigned to a treatment or comparison group. All borrowers managed by loan officers in the treatment group will be fingerprinted in the process of loan application. Borrowers served by officers in the comparison group will not be fingerprinted. To capture the effects of fingerprinting at different stages in the loan cycle and agricultural season, loan officers in the treatment group will fingerprint their borrowers in phases.
Researchers will evaluate the impact of fingerprinting on borrower and lender behavior and levels of agricultural output and business productivity among borrowers. In addition, researchers will evaluate any indirect effects on borrowers and lenders nearby the institutions that fingerprinted clients.


Abdul Latif Jameel Poverty Action Lab at the Massachusetts Institute of Technology

Innovation for Poverty Action (IPA)

Page publiée le 14 septembre 2015, mise à jour le 29 novembre 2017