FinTech Loans, Self-Employment, and Financial Performance

Leveraging data from a leading FinTech peer-to-peer lending platform in the United States, this study investigates the effect of an unsuccessful FinTech loan application on subsequent self-employment decisions. Our analysis shows that a failed loan application increases the probability of a transition out of self-employment by 22%, this effect is stronger for individuals in the lowest income decile. Additionally, securing a FinTech loan enhances self-employed individuals’ future financial performance. This enhancement is asymmetric, income enhancement is 3.11 larger for individuals in the lowest income decile, and credit-access enhancement is 1.85 times larger for individuals in the lowest credit-access decile.