Fueling regional economic prosperity: The role of P2P lending in micro-firms and small businesses

We examine the role of peer-to-peer (P2P) financing in fostering economic prosperity by contributing to the growth of micro- and small businesses. Zip codes with higher P2P activity exhibit larger reductions in unemployment, higher per-capita income growth, and increased business establishments. This is especially true for areas with higher levels of P2P loans intended to meet the needs of small businesses. Consistently, repeat P2P business borrowers show greater financial stability by achieving higher income, improved credit ratings, lower spreads, and better repayment outcomes. Our findings highlight an important channel through which P2P financing supports entrepreneurship and broader economic well-being.