Credit cards issued by non-financial companies: an alternative tool for financial inclusion and economic development?

ABSTRACT This study assesses the impacts of acquiring a credit card offered by a non-financial company in Colombia. The card, which is mainly targeted at low-income and unbanked individuals, can be used to fund home improvements and purchase home and personal goods in selected stores. We find that access to the credit card fostered financial inclusion and improved households’ standard of living and well-being. Beneficiaries were more likely to obtain financing through credit cards and increased their total debt and expenses in credit repayments while reducing the likelihood of borrowing from informal credit sources. However, we find no effect on accessing credit from the traditional financial sector. Acquiring the card also increased the likelihood of making key home improvements and purchasing certain expensive time-saving durables. Finally, the household’s saving capacity increased, which signals an improvement in economic well-being and shows that the debt repayment is manageable.