A lender in need is a lender indeed: Role of fintech lending after natural disasters

Abstract

Using earthquakes as exogenous demand shocks to the credit market, we explore whether fintech lending can complement traditional banks in face of surged credit demand under a continuous difference-in-differences framework. We find that fintech loans increases significantly after earthquakes, especially in the more severely affected regions. However, the acceptance ratio and the loan rate keep stable pre and post earthquakes, so as the borrower characteristics. Notably, the increase in fintech lending is lower in places where traditional banking networks are more intensive and concentrated, and where there is a larger share of local banks. Therefore, fintech lending is especially helpful in increases people’s access to credit in areas where traditional banks are pulling back. Last, we find positive effects of fintech credit in job retention and creation after disasters.