The Digital Credit Divide: Marketplace Lending and Entrepreneurship

Douglas Cumming, Hisham Farag, Sofia Johan, Danny McGowan* (Corresponding Author)

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


We conjecture that marketplace lending provokes an increase in the quantity of entrepreneurship, particularly in more regionally disadvantaged areas, albeit at lower average quality. Using a fuzzy regression discontinuity design that exploits exogenous variation in borrowers’ access to marketplace loans along US state borders, we estimate a 10% increase in marketplace lending causes a 0.44% increase in business establishments per capita. The effects are more pronounced for less experienced entrepreneurs, for small and less profitable firms, firms more dependent upon external finance, in industries with lower sunk costs of entry, and for low-income regions with inferior access to financial institutions.
Original languageEnglish
JournalJournal of Financial and Quantitative Analysis
Early online date1 Sep 2022
Publication statusE-pub ahead of print - 1 Sep 2022


  • Fintech
  • credit supply
  • entrepreneurship


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