澳门六合彩历史记录 Study: Entrepreneurs Getting Big Boost from Online Lending
Online marketplace loans are leading to a sharp rise in new businesses, evidence that the lending platforms are helping to redefine the U.S. banking industry, according to a research team that includes professors at 澳门六合彩历史记录.
The financial technology (FinTech) study, in the Journal of Financial and Quantitative Analysis, estimated that a 10 percent increase in marketplace lending caused a .44 percent jump in businesses established per capita.
The impact is even greater for less-experienced entrepreneurs and small and less-profitable firms and in low-income areas, noted , Ph.D., and , Ph.D., both of 澳门六合彩历史记录鈥檚 . Their research team included Hisham Farag, Ph.D., and Danny McGowan, Ph.D., both of the University of Birmingham in the United Kingdom.
鈥淲hen we started this study, we expected that FinTech funding would help entrepreneurship, but we were surprised to the extent to which it did help,鈥 Johan said. 聽聽
Marketplace lending platforms such as Lending Club and Prosper emerged in the mid-2000s and have soared in popularity over the past decade, originating roughly $6 billion of business loans annually in the United States, the study revealed. They provide faster and cheaper access to credit than traditional lenders, enabling start-ups and other businesses to grow.
The study points out that marketplace lenders expand the credit supply by capitalizing on digital algorithms in credit modeling to identify borrowers with 鈥渙bservably poor but actually good credit quality.鈥 While traditional lenders may use similar technology, bank-lending criteria do not allow them to lend to those borrowers, according to the researchers.
Also, marketplace lenders use digital technologies that reduce origination costs, meaning lower interest rates compared to traditional lenders.
鈥淏y reducing the cost of credit, marketplace lenders reduce potential entrepreneurs' expected operating costs, leading those that were previously unprofitable at the margin to enter,鈥 the study stated. 鈥淥verall, relative to traditional banks, there are reasons to expect that marketplace lending has a disproportionately positive impact on entrepreneurship, particularly for constrained entrepreneurs that might be viewed as lower quality鈥 borrowers.
The study compares the increase in entrepreneurial activity in states that restrict marketplace lending (Idaho, Indiana, Maine, Mississippi, Nebraska, North Dakota, West Virginia and Iowa) to the states that did not restrict online marketplace lending. While removal of these restrictions in recent years has benefitted these states, there are nevertheless costs to having had less entrepreneurship and a slower start to developing online marketplace in those regions.
鈥淏y having restrictions on marketplace lending, those eight states really lost out and had less entrepreneurship than what they would have had otherwise,鈥 Cumming said.
As America鈥檚 economy struggles to come back from the COVID-19 pandemic, states with increased marketplace lending have benefited more. Cumming鈥檚 current work shows that online lending has been much more stable, timely and resilient in the Covid-19 pandemic compared to bank consumer lending.
Cumming and Johan said this study is part of their ongoing research into the growth of FinTech, and more specifically equity crowdfunding and marketplace lending, as they gain momentum as an important source of external finance for entrepreneurs and firms.
鈥淲ith recent developments in FinTech, our goal as finance professors is to guide students to adapt to changes in the landscape of sources of finance for businesses,鈥 Johan said. 鈥淲e want to help 澳门六合彩历史记录 students not only become more valuable to companies in the FinTech industry, but also to other companies that have to be ready for FinTech.鈥
-澳门六合彩历史记录-
Tags: coronavirus | faculty and staff | business