Can internet finance alleviate the exclusiveness of traditional finance? evidence from Chinese P2P lending markets

Abstract

Recently, burgeoning Internet finance has been considered a crucial tool for alleviating financial exclusion in China, but few studies have empirically investigated its effectiveness. Using unique daily city-level multiplatform peer-to-peer (P2P) lending data from China, this paper empirically explores whether and how Internet finance, such as P2P lending, can alleviate financial exclusion. We find that city participation in P2P lending is positively linked to the degree of Internet development and negatively linked to the accessibility of traditional finance and that there is an obvious asymmetry in the levels of investment exclusion and borrowing exclusion. This paper provides empirical evidence that Internet finance can weaken the exclusiveness of traditional finance and reduce the asymmetry in investment and borrowing exclusion levels in traditional financial markets.