The Real Effects of FinTech Lending on SMEs: Evidence from Loan Applications
54 Pages Posted: 4 Mar 2021 Last revised: 4 Nov 2022
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The Real Effects of FinTech Lending on SMEs: Evidence from Loan Applications
The Real Effects of FinTech Lending on SMEs: Evidence from Loan Applications
The Real Effects of Fintech Lending on SMEs: Evidence from Loan Applications
The Real Effects of Fintech Lending on Smes: Evidence from Loan Applications
Date Written: March 3, 2021
Abstract
We examine the effects of FinTech lending on firm policies using proprietary data on loan applications and loans granted from a peer-to-business platform. We find that FinTech serves high quality and creditworthy small businesses who already have access to bank credit. Firms access FinTech to obtain long-term unsecured loans and reduce their exposure to banks with less liquid assets, stable funds, and capital. We find that firms with access to FinTech loans significantly increase investment, employment, and sales growth relative to firms that get their loan application rejected. We identify these effects by exploiting the number of banks in each municipality as a source of exogenous variation in the probability of obtaining a FinTech loan. Our findings suggest that FinTech allows firms to improve their financial flexibility and reduce bank dependence.
Keywords: FinTech, SMEs, Peer-to-Business lending, Small business lending
JEL Classification: G21, G23, O33
Suggested Citation: Suggested Citation