Peer-to-peer lending has sprung up in recent years, defined by its flexibility to meet the needs of loan applicants from a range of financial backgrounds. Institutional investors’ reluctance to fund small business owners has facilitated the widespread acceptance of peer-to-peer lending, which represents a convenient investment medium for prospective borrowers, individual investors, and P2P companies. Though, the inclusive model inherent in P2P lending breeds practical concerns for investors who expect to maximize returns while minimizing default risks. This paper proceeds to explore the value of information, the importance of information in principle-agent relationships, and how information must be leveraged further by P2P platforms to maintain high returns on investments for individual investors. Due to the importance of accurate, up-to-date borrower information, the literature herein suggests that P2P companies should outsource the procurement of borrower information to increase investment values and attract larger volumes of credit from individual investors. As a result of the absence of academic literature that explores the incorporation of microfinance institutions’ core competencies into the P2P business model, advantages of this business partnership are thus considered on a foundational level, leaving room for further empirical research in the future. Hence, this paper represents a working solution to be explored over time.
Accounting & Finance and Economics
Michael Jones (Thesis Director)
Copyright and Permissions
Original document was submitted as an Honors Program requirement. Copyright is held by the author.
Jones, Justin. (2016). How Microfinance Can Close Asymmetrical Information on Peer-to-Peer Platforms. In BSU Honors Program Theses and Projects. Item 152. Available at: https://vc.bridgew.edu/honors_proj/152
Copyright © 2016 Justin Jones