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The Impact of Peer-to-Peer Lending on Small Business Loans

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  • Jin-Hyuk Kim
  • Frank Stähler

Abstract

We investigate the impact of peer-to-peer lending on the small business loans originated by US depository institutions that are subject to the Community Reinvestment Act. We present a model where a borrower can choose between a traditional bank and a crowdlending platform and show that the entry of crowdlending can induce a switching effect as well as a credit expansion effect. Using the staggered entry of LendingClub across states between 2009 and 2017, we find that the platform entry reduced the small business loans originated by banks, in particular, in the low- or moderate-income tracts as well as in the distressed middle-income tracts with a high poverty rate. A conservative estimate suggests that the crowdlending entry may have reduced the aggregate lending volume to small businesses.

Suggested Citation

  • Jin-Hyuk Kim & Frank Stähler, 2020. "The Impact of Peer-to-Peer Lending on Small Business Loans," CESifo Working Paper Series 8268, CESifo.
    • Handle: RePEc:ces:ceswps:_8268
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    References listed on IDEAS

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    3. Jagtiani, Julapa & Lemieux, Catharine, 2018. "Do fintech lenders penetrate areas that are underserved by traditional banks?," Journal of Economics and Business, Elsevier, vol. 100(C), pages 43-54.
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    7. Timothy E. Dore & Traci L. Mach, 2018. "Recent Trends in Small Business Lending and the Community Reinvestment Act," FEDS Notes 2018-01-02, Board of Governors of the Federal Reserve System (U.S.).
    8. Jagtiani, Julapa & Lemieux, Catharine, 2016. "Small Business Lending: Challenges and Opportunities for Community Banks," Working Papers 16-02, University of Pennsylvania, Wharton School, Weiss Center.
    9. Huan Tang, 2019. "Peer-to-Peer Lenders Versus Banks: Substitutes or Complements?," The Review of Financial Studies, Society for Financial Studies, vol. 32(5), pages 1900-1938.
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    Cited by:

    1. Xie, Xueyan & Zhu, Xiaoyang, 2022. "FinTech and capital allocation efficiency: Another equity-efficiency dilemma?," Global Finance Journal, Elsevier, vol. 53(C).
    2. Prieger, James E., 2023. "Local banking markets and barriers to entrepreneurship in minority and other areas," Journal of Economics and Business, Elsevier, vol. 124(C).
    3. Guo, Junyan & Fang, Hanqing & Liu, Xuexin & Wang, Cizhi & Wang, Yuan, 2023. "FinTech and financing constraints of enterprises: Evidence from China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 82(C).
    4. Bollaert, Helen & Lopez-de-Silanes, Florencio & Schwienbacher, Armin, 2021. "Fintech and access to finance," Journal of Corporate Finance, Elsevier, vol. 68(C).

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    More about this item

    Keywords

    crowdfunding; marketplace lending; fintech; Community Reinvestment Act;
    All these keywords.

    JEL classification:

    • D26 - Microeconomics - - Production and Organizations - - - Crowd-Based Firms
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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