Microfinancing and Home-purchase Restrictions: Evidence from the Online “Peer-to-Peer” Lending in China

This paper uses a quasi-natural experiment to study how houseowners’ borrowing costs were affected by the housing value fluctuation in China using a novel micro-level data from an online peer-to-peer (P2P) lending platform. The impacts on other equilibrium loan variables such as borrowing duration and numbers of lenders are also examined. By taking the housing purchase restriction policy shock as an exogenous event, we employ a difference-in-differences (DD) identification strategy. It is found that the equilibrium interest rate decreased, the growth rate of the deal completion time reduced and the number of investors went up for borrowers with house properties from the cities implementing the restriction policy. It echoes from a further triple differences (DDD) when considering city-specific effect based on samples with houseowners and non-houseowners. In addition, we estimate the heterogeneous effect for both household and city-level characteristics. Our dynamic analysis indicates that effects on houseowners’ P2P borrowing activities persist for 9 months. The channel of the effect was from the collateral effect rather than the pure wealth effect.