Determinants of Peer-to-Peer Lending Expansion: The Roles of Financial Development and Financial Literacy

26 Pages Posted: 5 May 2020

See all articles by Eun Young Oh

Eun Young Oh

University of Portsmouth

Peter Rosenkranz

Asian Development Bank

Date Written: Mar 19, 2020

Abstract

To explore the determinants of peer-to-peer (P2P) lending expansion, this study examines factors that impact P2P lending using a sample of 62 economies over the period 2015–2017. We investigate the effects of financial development and financial literacy on the expansion of P2P lending. The level of development of financial institutions is assessed by access, efficiency, and depth. We find that financial institutions’ efficiency, financial literacy, and lower branch and ATM penetration are positively related with the expansion of P2P lending. This finding suggests that P2P lending can fill funding gaps in economies where traditional financial institutions may be less available, and thus promote financial inclusion. We also find that better information technology infrastructure and high new business density are positively associated with the expansion of P2P lending, suggesting that physical infrastructure is an essential prerequisite for it, while this is more likely to happen in dynamic business environments.

Keywords: financial development, financial literacy, fintech, peer-to-peer lending

JEL Classification: E51, G23, G53, N20, O33

Suggested Citation

Oh, Eun Young and Rosenkranz, Peter, Determinants of Peer-to-Peer Lending Expansion: The Roles of Financial Development and Financial Literacy (Mar 19, 2020). Asian Development Bank Economics Working Paper Series No. 613, Available at SSRN: https://ssrn.com/abstract=3590998 or http://dx.doi.org/10.2139/ssrn.3590998

Eun Young Oh

University of Portsmouth ( email )

University House
Winston Churchhill Avenue
Portsmouth, Hampshire PO1 2UP
United Kingdom

Peter Rosenkranz (Contact Author)

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

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