Risk Management Instruments Offered by P2P Lending Platforms. A Cross-Country Empirical Analysis Based on a Scoring System

Abstract

The possibility for individuals to lend money directly to other individuals or small companies without the intermediation of a bank is fascinating. In principle, it could also offer interesting returns for investors and lower financing costs for borrowers. Although promising, this new channel for fund transfers also raises a number of critical issues. In particular, one of these concerns the availability of sufficient information and risk management tools for both lenders and borrowers. We propose a structured methodology for evaluating P2P lending platforms in terms of risk management-related information and tools, and apply our scoring system to analyse and compare a sample of online marketplaces from different parts of the world.