The Role of P2P Platforms in Enhancing Financial Inclusion in US – An Analysis of Peer-to-Peer Lending Across the Rural-Urban Divide

Abstract

In this paper, we examine the role of P2P platforms in enhancing financial inclusion from the borrowers’ point of view across the rural-urban dimension. We show that when number of bank branches decrease in a rural community, the P2P loan requests increase if there is at least one bank branch in the community allowing people to participate in the P2P market. We also find that the number of P2P loan requests from urban areas are higher when such areas have fewer pawnshops per capita. Our results suggest that P2P enhances financial inclusion of those lacking traditional institutions in rural communities and offers an alternative to those with fewer fringe banks in urban communities.

Keywords: Peer-to-Peer Lending, Pawn Lending, Credit Unions, Rural, Urban, Access to Credit, FinTech, Financial Inclusion, Financial Access, Fringe Bank

JEL Classification: D53, G21, G23, G28, O16, O33, R2