The effect of Peer-to-Peer lending on financial exclusion: Evidence from China

The association of financial technology (fintech) and financial exclusion has attracted attention since rapid growth of fintech innovation. This study investigates the funding probability of the financial excluded borrower in a large P2P lending platform. Using loanlevel data from a lending Chinese P2P company, we find there is a negative indirect effect of financial exclusion on funding success through credit score. In a moderated mediation analysis, we also find new business model such as offline authentication and education qualification positively moderates the linkage between the financial excluded and credit score and therefore negative indirect effect of financial exclusion on funding success is overturned when the excluded borrower has conducted offline authentication and obtained higher education qualification. Lastly, we examine the determinants of offline authentication decision. We find the borrowers in a city with better financial infrastructure are more willing to conduct authentication. However, the financial excluded borrowers are less likely to conduct offline authentication.