A Study of the impact of financial literacy and financial development on peer-to-peer lending in Developed and Developing Countries

Abstract

This study seeks to examine how financial literacy and financial development, specifically financial access, financial depth, and financial efficiency affect the expansion of peer-to-peer (P2P) lending using a sample of 40 economies with data obtained in 2020. The findings reveal financial literacy and financial efficiency positively affect the expansion of P2P lending, while financial depth negatively correlates with the expansion of P2P lending. Additionally, financial literacy contributes significantly to the expansion of P2P lending in developing economies, but not in developed economies. This finding suggests that financial literacy does not factor significantly into the expansion of P2P lending in developed economies because developed economies already have higher financial literacy rates than developing economies. This study suggests that more emphasis on financial education, especially in developing economies, and assistance in terms of fundings from the government to improve financial efficiency will greatly aid in the expansion of P2P lending.