Researchers from Harvard Business School and University of California Berkeley just proved something amazing about poor people and money. They studied over 20,000 Kenyans who applied for small loans through their phones. The scientists worked with a digital lender called Tala to track what happened to borrowers after they received approval. People who got approved for these tiny loans actually became more successful than those who got rejected. The study completely flips what most experts believe about lending money to low-income families.
The approved borrowers showed incredible improvements across multiple areas of their lives. They became 24 percent more likely to find jobs or start their businesses compared to rejected applicants. These successful borrowers also traveled to almost 10 percent more cities for work and opportunities. They sent 27 percent more text messages to friends and family members. Their monthly earnings jumped up 21 percent higher than people who never received loans.
Jung Koo Kang from Harvard Business School said the results shocked him and his research team. The professor explained that most people think poor borrowers will waste credit and make bad financial decisions. Instead, even small digital loans helped people discover new economic opportunities and improve their overall wellbeing. The borrowers spent 15 percent more money per purchase, which showed they gained confidence about their financial futures. Mobile phone data proved more reliable for judging creditworthiness than traditional banking methods.
The approved borrowers showed incredible improvements across multiple areas of their lives. They became 24 percent more likely to find jobs or start their businesses compared to rejected applicants. These successful borrowers also traveled to almost 10 percent more cities for work and opportunities. They sent 27 percent more text messages to friends and family members. Their monthly earnings jumped up 21 percent higher than people who never received loans.
Jung Koo Kang from Harvard Business School said the results shocked him and his research team. The professor explained that most people think poor borrowers will waste credit and make bad financial decisions. Instead, even small digital loans helped people discover new economic opportunities and improve their overall wellbeing. The borrowers spent 15 percent more money per purchase, which showed they gained confidence about their financial futures. Mobile phone data proved more reliable for judging creditworthiness than traditional banking methods.
