Assessing risk in lending crowdfunding: an investor and platform manager perspective

Lending crowdfunding (CF) is a new promising funding mechanism. Although all the potentials offered, CF also involves some risks, mainly the credit risk that is taken by crowdfunders. This investigation intends to understand if the risks involved in an operation of lending CF are assessed in the same way either by crowdfunders and CF platform managers. This study uses a quantitative method, to examine the data related to the operations performed in a Portuguese lending CF platform (Raize). The results indicate that the interest rate charged is influenced by the organisation and loan characteristics although the major determinant is the organisation's risk classification. There is also evidence of some convergence within the evaluation made by the CF platform staff members and the crowdfunders. However, investors and the staff of Raize platform have different perceptions of the risks involved in a lending operation as investors applied slightly higher interest rates to borrowing firms than Raize managers suggested.