The Real Effects of FinTech Lending on SMEs: Evidence from Loan Applications
41 Pages Posted: 4 Mar 2021 Last revised: 23 Nov 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. We find that FinTech serves high quality and creditworthy small businesses who already have access to bank credit. Firms use FinTech to obtain long-term unsecured loans and reduce their exposure to banks with less liquid assets, stable funds, and capital. We find that access to FinTech spurs firm growth, employment and investment relative to firms that get their loan application rejected. In addition, firms with access to FinTech increase leverage and substitute long-term bank debt with FinTech debt. Our findings suggest that FinTech reduces firms' bank dependence and exposure to banking shocks.
Keywords: FinTech, SMEs, Peer-to-Business lending, Small business lending
JEL Classification: G21, G23, O33
Suggested Citation: Suggested Citation