Working Paper: CEPR ID: DP16684
Authors: Afonso E.A.; Miguel Ferreira; Melissa Prado; A. Emanuele Rizzo
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.
Keywords: fintech; SMEs; peer-to-business lending; small business lending
JEL Codes: G21; G23; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Fintech lending (G21) | investment (G31) |
| Fintech lending (G21) | employment (J68) |
| Fintech lending (G21) | sales growth (O49) |
| Fintech lending (G21) | asset growth (G19) |
| Fintech lending (G21) | leverage (G24) |
| Fintech lending (G21) | secured debt (G32) |
| Fintech lending (G21) | profitability (L21) |
| Fintech lending (G21) | diversification of lending relationships (G21) |