The online trading platform Alibaba provides automated credit for over three million small and medium size firms in China. Various threshold effects governing the automated allocation of credit based on the business traffic observed in the online market place. These credit threshold effects allow us to apply a Regression Discontinuity Design (RDD) and explore the causal effect of small firm credit access on firm growth and how this effect varies by industry and local banking conditions throughout China. In a second step, we further use natural disasters as an exogenous shock to study whether firms with access to credit are more resilient to negative exogenous shocks. Our findings contribute to a better understanding of the role of FinTech in overcoming credit constraints of small and medium size firms and how deficiencies in the local banking market can be compensated by Fintech.
Project members: Harald Hau (Université de Genève), Yi Huang (Graduate Institute), Hongzhe Shan (SFI PhD candidate), Ye Zhang (SFI PhD candidate)
Project Partner: Zixia Sheng (Ant Financial)