The Real Effects of FinTech Lending on SMEs: Evidence from Loan Applications
39 Pages Posted: 4 Mar 2021 Last revised: 26 Oct 2021
Date Written: March 3, 2021
We show that FinTech lending affects credit markets and real economic activity using a unique data set of a Peer-to-Business platform for which we have the universe of loan applications and loans granted. We find that FinTech serves the same segment of high quality and creditworthy small businesses as banks. Firms use FinTech loans to reduce bank dependence, especially from less liquid banks. We find that firms that access FinTech lending increase assets, employment, and sales relative to firms that get their loan application rejected. In addition, we find that firms increase leverage as they substitute long-term bank debt with long-term FinTech debt and short-term bank debt. Our findings suggest that FinTech lending reduces financing constraints and spurs investment and firm growth.
Keywords: FinTech, SMEs, Peer-to-Business lending, Small business lending
JEL Classification: G21, G23, O33
Suggested Citation: Suggested Citation