Mobile Money as a Steppingstone : Addressing Voids in Credit-Market Institutions through Digital Platforms

Digital platforms often emerge to meet the needs left unaddressed by missing or underdeveloped institutional infrastructure (i.e., “institutional voids”). We examine the case of “mobile money” and the role it has played in filling voids in credit-market institutions that limit access to credit for potential borrowers in emerging and developing economies. We argue that the proliferation of mobile money has increased access to credit from formal financial institutions among previously underserved and excluded borrowers in two ways: (i) through end-user certification, and (ii) strategic actions by incumbent organizations. We examine the evidence for these mechanisms in the context of the growth in mobile money penetration and usage in emerging economies with voids in credit-market institutions. We find support for both mechanisms contributing to the steppingstone effect of mobile money that increases users’ access to credit from formal financial institutions. Our findings suggest that digital platforms such as mobile money can become steppingstones that bridge institutional voids