The Impact of Peer-to-Peer Lending Platforms on Financial Inclusion

Abstract

Peer-to-peer (P2P) lending platforms have emerged as innovative financial technologies that directly connect borrowers and lenders, bypassing traditional banking intermediaries. This study investigates the impact of P2P lending on financial inclusion using a mixed-method research design that integrates quantitative data analysis with qualitative case studies. Quantitative analysis examines loan approval rates, borrower demographics, default probabilities, and interest rate structures across P2P platforms relative to conventional banks. Logistic regression models are applied to identify the determinants of credit access and repayment behaviors. Complementing this, qualitative data derived from interviews and case studies of borrowers and lenders provide insights into perceptions of fairness, trust, transparency, and digital accessibility. The integrated findings indicate that P2P lending significantly improves access to credit for underserved groups, including micro, small, and medium enterprises (MSMEs), women entrepreneurs, and rural borrowers, while also offering competitive interest rates compared to traditional banks. However, challenges such as higher default risks, limited digital literacy, and regulatory gaps highlight the need for robust oversight and borrower protection mechanisms. Overall, the study concludes that P2P lending platforms are not substitutes but complements to traditional finance, and their effectiveness in fostering financial inclusion depends on a balance between innovation, governance, and accessibility.