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The Real Effects of FinTech Lending on SMEs: Evidence from Loan Applications

Author

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  • Prado, Melissa
  • Eça, Afonso
  • Ferreira, Miguel

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 a 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.

Suggested Citation

  • Prado, Melissa & Eça, Afonso & Ferreira, Miguel, 2022. "The Real Effects of FinTech Lending on SMEs: Evidence from Loan Applications," CEPR Discussion Papers 16684, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16684
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    More about this item

    Keywords

    Fintech; Smes; Peer-to-business lending; Small business lending;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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