The real effects of FinTech lending on SMEs: evidence from loan applications

Miguel A. Ferreira, Afonso Eça, Melissa Porras Prado and A. Emanuele Rizzo

No 2639, Working Paper Series from European Central Bank

Abstract: 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 allows firms to preserve financial flexibility, reduce their bank dependence and exposure to banking shocks. JEL Classification: G21, G23, O33

Keywords: bank relationships; debt structure; FinTech; firm growth; small business lending (search for similar items in EconPapers)
Date: 2022-02
New Economics Papers: this item is included in nep-ban, nep-bec, nep-cfn, nep-cwa, nep-ent, nep-fdg and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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