DP16684 The Real Effects of FinTech Lending on SMEs: Evidence from Loan Applications

Author(s): Afonso Eça, Miguel Ferreira, Melissa Prado, A. Emanuele Rizzo
Publication Date: October 2021
Date Revised: November 2021
Keyword(s): Fintech, Peer-to-Business lending, Small business lending, SMEs
JEL(s): G21, G23, O33
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16684

We show that FinTech lending affects credit markets and real economic activity using a unique data set of a Peer-to-Business platform for which we have the universe of loan applications. We find that FinTech serves high quality and creditworthy small businesses who already have access to bank credit. Firms use FinTech to obtain long-term unsecured loans and reduce their exposure to banks with less liquid assets, stable funds, and capital. We find that access to FinTech spurs firm growth, employment and investment relative to firms that get their loan application rejected. In addition, firms with access to FinTech increase leverage and substitute long-term bank debt with FinTech debt. Our findings suggest that FinTech reduces firms' bank dependence and exposure to banking shocks.