Determinants of peer-to-peer lending expansion: the roles of financial development and financial literacy

To explore the determinants of the global peer-to-peer (P2P) lending expansion, this study examines factors that impact P2P lending using a sample of 62 economies over the period 2015–2017. We find that greater financial institutions’ efficiency, higher financial literacy, and less access to formal financial services are positively related with the expansion of P2P lending. This paper provides empirical evidence that the effects of financial development and financial literacy on P2P lending are different between emerging and advanced economies. We also present evidence that better information technology infrastructure and high new business density are positively associated with the expansion of P2P lending, suggesting that physical infrastructure is an essential prerequisite for it, while this is more likely to happen in dynamic business environments.