Interest rate drivers in the peer-to-business lending market
Résumé
Crowdlending is one of multiple sources of alternative financing that is gaining importance.
Most existing research focuses on peer-to-peer platforms (P2P), but more needs to be learned
about those dedicated to financing firms (P2B- peer-to-business platforms). This study ex-
plores the dynamics driving the interest rates, which are both a cost for the entrepreneur
(lower is better) and a return for the investors (higher is better). This rate is also usually used
as a proxy for the default risk when it is assessed only by the lender. However, intermediaries
can manipulate it to create a two-sided market between offer and demand. We collected data
from 16 French lending platforms. Most of them set the interest rate before offering projects
to investors (the crowd), but a few let the crowd set the interest rate through bidding mecha-
nisms. Our results indicate that 1) crowdlending platforms are likely to set lower overall inter-
est rates than the crowd, 2) the reasonings of platforms and the crowd differ when assessing
credit risk, and 3) Platforms' competition and attractiveness issues are of significant impor-
tance when determining interest rates.
Domaines
Finance [q-fin.GN]Origine | Fichiers produits par l'(les) auteur(s) |
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