Viability of a Peer-to-Peer Loan Market for Students and the Underbanked
Global Journal of Business Research, v. 9 (4) p. 53-66
14 Pages Posted: 28 Jan 2016
Date Written: 2015
It is difficult to achieve financial stability without access to traditional banking services. “Unbanked” and “underbanked” groups therefore face significant financial hurdles, making them targets for predatory fringe lenders. In this paper, we present the results of a credit survey given to college students and low income residents of Tacoma, Washington. Our first goal with this survey was to characterize credit use and access among these groups. Given that information, we then could assess the feasibility of developing a viable peer-to-peer (P2P) platform for them that would be a consumer-friendly alternative to fringe lending. We find that there is a need for small-dollar financial assistance, even within our relatively affluent student sample. We discuss the possibility of creating a student P2P market to help them, working through Four Horsemen Investments, a student-run 501(c)(3) not-for-profit organization. Developing such a market on a small scale would be a precursor to expanding it to the local community, where it could help at-risk, low-income families.
Keywords: Peer-to-Peer Lending, Payday Loans, Fringe Credit
JEL Classification: G21, G23, G10
Suggested Citation: Suggested Citation