The social welfare of marketplace lending: Evidence from natural disasters

48 Pages Posted: 12 Oct 2021 Last revised: 25 Feb 2022

See all articles by Daniel Bradley

Daniel Bradley

University of South Florida

Matthew Henriksson

University of Mississippi - School of Business Administration

Sarath Valsalan

University of Mississippi - School of Business Administration

Date Written: February 24, 2022

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. 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 suffer delinquency over the life of the loan, but loans granted a hardship accommodation delay of payment reduce the likelihood of future delinquency providing relief to borrowers and reduced delinquency costs to investors. Contrary to regulatory concerns that P2P lending is predatory, our results suggest they provide positive social welfare benefits.

Keywords: Marketplace lending, natural disasters, P2P lending, personal loans, financial technology

JEL Classification: G2, G21, G23, G28, G29

Suggested Citation

Bradley, Daniel and Henriksson, Matthew and Valsalan, Sarath, The social welfare of marketplace lending: Evidence from natural disasters (February 24, 2022). Available at SSRN: https://ssrn.com/abstract=3940557 or http://dx.doi.org/10.2139/ssrn.3940557

Daniel Bradley

University of South Florida ( email )

Tampa, FL 33620
United States

Matthew Henriksson (Contact Author)

University of Mississippi - School of Business Administration ( email )

PO Box 3986
Oxford, MS 38677
United States

Sarath Valsalan

University of Mississippi - School of Business Administration ( email )

PO Box 3986
Oxford, MS 38677
United States

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