This paper examines whether internet penetration influences portfolio risk in microfinance institutions (MFIs). Using a cross-country panel that combines institution-level data from the MIX Market with country-level measures of internet usage, we estimate fixed-effects models to assess the relationship between digital connectivity and portfolio delinquency. We find that higher internet penetration is associated with economically meaningful reductions in portfolio-at-risk ratios at both 30 and 90 days. The results are robust to MFI-level controls, MFI and year fixed-effects, and alternative specifications. Heterogeneity analyses indicate that the effect is concentrated in group lending models, consistent with enhanced monitoring and information-sharing mechanisms. Dynamic panel estimations using system-GMM and an instrumental variables approach exploiting variation in mobile cellular subscriptions support a causal interpretation of this relationship. Overall, the evidence suggests that digital infrastructure plays an important role in improving portfolio quality in microfinance markets.
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