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© 2024 International Monetary Fund
WP/24/70
IMF Working Paper
RES
Mobile Internet, Collateral, and Banking
Prepared by Angelo D’Andrea, Patrick Hitayezu, Kangni Kpodar, Nicola Limodio, Andrea F. Presbitero1
Authorized for distribution by Aqib Aslam
March 2024
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
ABSTRACT: Combining administrative data on credit, internet penetration and a land reform in Rwanda, this paper shows that the complementarity between technology and law can overcome financial frictions. Leveraging quasi-experimental variation in 3G availability from lightning strikes and incidental coverage, we show that mobile connectivity steers borrowers from microfinance to commercial banks and improves loan terms. These effects are partly due to the role of 3G internet in facilitating the acquisition of land titles from the reform, used as a collateral for bank loans and mortgages. We quantify that the collateral’s availability mediates 35% of the overall effect of mobile internet on credit and 80% for collateralized loans.
| JEL Classification Numbers: | G21, G23, O33 |
| Keywords: | Banks; Credit; High-speed Internet; Mobile; Technological Change |
| Author’s E-Mail Address: | APresbitero@imf.org, KKpodar@imf.org |
| JEL Classification Numbers: | G21, G23, O33 |
| Keywords: | Banks; Credit; High-speed Internet; Mobile; Technological Change |
| Author’s E-Mail Address: | APresbitero@imf.org, KKpodar@imf.org |
Authors’ contacts: Angelo D’Andrea, Bank of Italy, e-mail: angelo.dandrea@bancaditalia.it; Patrick Hitayezu, Research Hub, e-mail: phitayezu@researchub.co.rw; Kangni Kpodar, International Monetary Fund and FERDI, e-mail: KKpodar@imf.org; Nicola Limodio, Bocconi University, e-mail: nicola.limodio@unibocconi.it; Andrea F. Presbitero, International Monetary Fund and CEPR, e-mail: apresbitero@imf.org. This paper has benefitted from discussions with and the suggestions of Tim Besley, Diana Bonfim, Pedro Bordalo, Lorenzo Casaburi, Vicente Cunat, Simeon Djankov, Kim Fe Cramer, Andrea Fabiani, Nicola Gennaioli, Doug Gollin, Sean Higgins, Joe Kaboski, Jonas Hjort, Joe Kaboski, Peter Kondor, Eliana La Ferrara, Nan Li, Kristina Manysheva, Karsten Muller, Daniel Paravisini, Marco Sanfilippo, Anatoli Segura, Andrei Shleifer, Andrea Tesei and seminar participants at Bank of Italy, CSAE Conference 2024, Bank of Portugal, Erasmus University, International Monetary Fund, LSE, Maastricht Univerity, National University of Singapore, STEG Annual Conference 2024, Tilburg University, University of New South Wales, University of Sydney, and University of Technology Sydney. We are grateful to Daniel Bjorkegren for comments and sharing his dataset on incidental coverage and to LEAP and Eliana La Ferrara for sharing data on coverage. This document is an output from the research initiative ‘Structural Transformation and Economic Growth’ (STEG, contract reference STEG LOA LRG001 453), and the IMF-FCDO project Macroeconomic Research in Low-Income Countries project (MRLIC, project ID: 60925), both funded by the Foreign, Commonwealth and Development Office (FCDO). Camilla Cherubini, Ilaria Dal Barco, and Gabriele Bertuzzi provided excellent research assistance. The views expressed are solely those of the authors and should not be interpreted as reflecting the views of the Bank of Italy, the Foreign, Commonwealth and Development Office, the FERDI, the International Monetary Fund, their Executive Boards, or their management.