From One Crisis to Another: Impact of COVID-19 Pandemic on Peer-To-Peer Lending Market

Abstract

This chapter empirically examines the liquidity risk experienced by P2P lending market during the COVID-19 pandemic. This study utilises time series and survival regression analyses to provide early evidence of the pandemic induced exposure to liquidity risk in the peer-to-peer lending market. We use the daily number of listings and the probability of success in Bondora’s secondary market as continuous dependent variables. The findings indicate that the secondary market listings substantially increased around the early days of the pandemic. Using the method of survival analysis, we also find that despite increased volatility, the probability of successful listing increased during the period of the pandemic. Our findings improve the current risk management models and security mechanisms used by P2P lending platforms. However, the findings of this chapter should be used with caution because of the limitations imposed by third parties and rapid changes happening in the industry.

Keywords: Peer-to-peer, Pandemic, COVID-19, Crowdfunding, Lending markets, Europe, Financial distress, Bondora, FinTech, Liquidity risk