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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Faten Ben Slimane & Gaël Leboeuf, 2024. "Interest rate drivers in the peer-to-business lending market," Post-Print hal-04595467, HAL.
    • Handle: RePEc:hal:journl:hal-04595467
    as

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