Marketplace lending in the wake of disaster
52 Pages Posted: 12 Oct 2021 Last revised: 27 Mar 2024
Date Written: March 1, 2024
Abstract
Using natural disasters as exogenous shocks to the peer-to-peer (P2P) loan market, we document a local increase in loan demand post-disaster, which is significantly elevated in low deposit areas. Interest rates and delinquencies from loans approved during this demand shock are similar to pre-event levels. Loans allocated prior to a disaster are more likely to default, but loans granted a hardship delay of payment accommodation exhibit a reduction in default probability, providing relief to borrowers and lower costs to investors. Overall, while regulators are concerned that P2P lending is predatory, our findings provide some positive benefits of this marketplace.
Keywords: Marketplace lending, natural disasters, P2P lending, personal loans, FinTech
JEL Classification: G2, G21, G23, G28, G29
Suggested Citation: Suggested Citation