Peer-to-peer lending: Exploring borrowers’ motivations and expectations

Article Date: 06 Dec 2024
Article URL: https://www.tandfonline.com/doi/full/10.1080/00472778.2024.2431232?af=R
Article Image: Cover image

Summary

This paper examines why small businesses in five European countries turn to peer-to-peer (P2P) lending platforms, what they expect from these platforms and how satisfied they are. The study fills a gap in the literature by focusing on entrepreneurs’ perspectives rather than platform or investor risk-management views. The main findings show that firms use P2P lending mainly to obtain quick, flexible finance, to diversify funding sources and to reduce dependence on traditional banks. A notable result is that many borrowers are unclear about the exact financial instruments they are using to raise debt. The authors find no strong differences across countries or firm characteristics in the patterns observed.

Key Points

Borrowers primarily seek immediate, flexible financing and alternatives to bank lending.
P2P is used to diversify funding sources rather than replace banks entirely.
Many small-business borrowers lack awareness of the specific financial instruments used in P2P lending.
No significant variation in motivations or expectations was found across countries or firm types in this sample.
Authors recommend further research on entrepreneurs’ financial literacy as a policy priority for sustainable fintech adoption.

Context and relevance

The study is relevant to policymakers, fintech providers and small-business advisers. It highlights that while P2P platforms offer speed and flexibility, limited borrower understanding about instruments could expose entrepreneurs to misjudged costs and risks. As digital finance grows, the paper supports calls for better financial education and clearer disclosures to ensure P2P supports orderly and sustainable small-business finance. The cross-country scope strengthens the generalisability of these practical insights for European markets.

Why should I read this?

If you work with small firms, run a fintech, or advise on business finance, this saves you time — the authors have read through the nitty-gritty and pulled out what matters: firms want quick cash and fewer bank headaches, but often don’t fully get what they’re signing up to. Short, useful and directly applicable to policy and practice.

Source

Source: https://www.tandfonline.com/doi/full/10.1080/00472778.2024.2431232?af=R