Journal
MANAGEMENT SCIENCE
Volume 63, Issue 12, Pages 4175-4187Publisher
INFORMS
DOI: 10.1287/mnsc.2016.2560
Keywords
household finance; local; banking; peer-to-peer lending
Funding
- Anderson Faculty Excellence Fund
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This paper uses detailed data from an online peer-to-peer lending intermediary to test whether local access to finance affects consumers' willingness to pay for loans. After controlling for local economic conditions and borrower credit quality, we find that borrowers who reside in areas with good access to bank finance request loans with lower interest rates. This effect is stronger for borrowers with poor credit and those seeking small loans, suggesting that local access to finance is more important for marginal borrowers. Overall, our findings shed light on how consumers substitute between alternative sources of finance.
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