Lending-based crowdfunding: opportunities and risks

Marcello Bofondi

No 375, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: Lending-based crowdfunding (LBC) is an alternative funding channel to that represented by credit intermediaries. LBC allows households and small businesses to be financed directly by a multitude of investors. Supply meets demand online platforms. This paper first describes how LBC platforms operate, identifying the potential risks and benefits of their operations and then attempts to indicate if and how LBC will contribute to the evolution of the financial system. Although it is unlikely that LBC will pose a significant threat to the banking system and its profitability, it has nevertheless the potential to stimulate traditional intermediaries to review their business models and to create an alternative source of financing for households and small and medium-sized enterprises. The risks to financial stability posed by LBC can be mitigated by establishing rules that limit the expansion of credit to riskier borrowers and by ensuring investors� capacity to absorb any losses.

Keywords: FinTech; lending-based crowdfunding; financial innovation (search for similar items in EconPapers)
JEL-codes: G21 G23 G28 (search for similar items in EconPapers)
Date: 2017-03
New Economics Papers: this item is included in nep-ban, nep-cfn and nep-pay
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_375_17

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