Macroeconomic Determinants of Loan Delinquencies: Evidence from the US Peer-to-Peer Lending Market

43 Pages Posted: 29 Apr 2021 Last revised: 23 Aug 2021

See all articles by Asror Nigmonov

Asror Nigmonov

UNSW Business School

Syed Shams

University of Southern Queensland

Khorshed Alam

University of Southern Queensland - Australian Centre for Sustainable Business and Development (ACSBD)

Date Written: April 29, 2021

Abstract

The study documented in this paper utilises a probit regression analysis to empirically investigate the key macroeconomic factors that influence credit risk in the peer-to-peer (P2P) lending market. By aggregating the United States (US) state-level data with LendingClub’s loan book covering the period from 2008–2019, this study examines multiple factors related to default risks of loans issued by P2P lending platforms. Our results show that a higher interest rate and inflation increase the probability of default in the P2P lending market. We also find that the impact of interest rate on the probability of default is significantly higher for loans with lower ratings. The study’s outcomes, by paving the way to future market best practices, are applicable to P2P lending platforms and investors in their default estimation of loans.

Keywords: peer-to-peer lending, crowdfunding, default, marketplace lending, probit

JEL Classification: E31, E43, G29, G14, O16

Suggested Citation

Nigmonov, Asror and Shams, Syed and Alam, Khorshed, Macroeconomic Determinants of Loan Delinquencies: Evidence from the US Peer-to-Peer Lending Market (April 29, 2021). ADB-IGF Special Working Paper Series “Fintech to Enable Development, Investment, Financial Inclusion, and Sustainability”, Available at SSRN: https://ssrn.com/abstract=3836404 or http://dx.doi.org/10.2139/ssrn.3836404

Asror Nigmonov (Contact Author)

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Syed Shams

University of Southern Queensland ( email )

Sprinfield
Springfield
Springfield, Queensland 4300
Australia
+61734704551 (Phone)

Khorshed Alam

University of Southern Queensland - Australian Centre for Sustainable Business and Development (ACSBD) ( email )

Toowoomba, 4350
Australia

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