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The Digital Credit Divide: Marketplace Lending and Entrepreneurship

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  • Cumming, Douglas
  • Farag, Hisham
  • Johan, Sofia
  • McGowan, Danny

Abstract

We conjecture that marketplace lending provokes an increase in the quantity of entrepreneurship, particularly in more regionally disadvantaged areas, albeit at lower average quality. Using a fuzzy regression discontinuity design that exploits exogenous variation in borrowers’ access to marketplace loans along U.S. state borders, we estimate a 10% increase in marketplace lending causes a 0.44% increase in business establishments per capita. The effects are more pronounced for less experienced entrepreneurs, for small and less profitable firms, firms more dependent upon external finance, in industries with lower sunk costs of entry, and for low-income regions with inferior access to financial institutions.

Suggested Citation

  • Cumming, Douglas & Farag, Hisham & Johan, Sofia & McGowan, Danny, 2022. "The Digital Credit Divide: Marketplace Lending and Entrepreneurship," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 57(7), pages 2659-2692, November.
    • Handle: RePEc:cup:jfinqa:v:57:y:2022:i:7:p:2659-2692_6
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    Citations

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    Cited by:

    1. Christopher J. Boudreaux & Rebel A. Cole, 2025. "Intellectual property among incorporated and unincorporated entrepreneurs," Small Business Economics, Springer, vol. 65(4), pages 2089-2111, December.
    2. Toni Ahnert & Sebastian Doerr & Nicola Pierri & Yannick Timmer, 2026. "Information Technology in Banking and Entrepreneurship," Management Science, INFORMS, vol. 72(3), pages 1796-1813, March.
    3. Zhuang Liu & Xingyi Li & Zhongfei Li, 2024. "Inclusive FinTech, open banking, and bank performance: evidence from China," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-24, December.
    4. Sachin Kumar Sharma & P. Vigneswara Ilavarasan & Stan Karanasios, 2024. "Small businesses and FinTech: a systematic review and future directions," Electronic Commerce Research, Springer, vol. 24(1), pages 535-575, March.
    5. Douglas Cumming & Hisham Farag & Santosh Koirala & Danny McGowan, 2026. "How Disruptive is Financial Technology?," Papers 2601.14071, arXiv.org, revised Jan 2026.
    6. Lars Hornuf & Johannes Voshaar, 2024. "What Is an Effective Signal in Crowdfunding? Evidence from Expert Researchers and a Meta-Study," CESifo Working Paper Series 11501, CESifo.

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