Interest rate drivers in the peer-to-business lending market

Faten Ben Slimane () and Gaël Leboeuf ()
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Faten Ben Slimane: IRG - Institut de Recherche en Gestion - UPEM - Université Paris-Est Marne-la-Vallée - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12
Gaël Leboeuf: CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon, Faculté d’Économie et de Gestion (FEG), AMU

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Abstract: 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.

Keywords: Crowdlending; Fintech; interest rate; risk assessment; lending decision; market competition (search for similar items in EconPapers)
Date: 2024-05-29
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Published in 8th Crowdinvesting Symposium, Dresden University of Technology; Dresden Concept, May 2024, Dresden, Germany

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04595467

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