A predictive indicator using lender composition for loan evaluation in P2P lending
Open Access
- 22 June 2021
- journal article
- research article
- Published by Springer Science and Business Media LLC in Financial Innovation
- Vol. 7 (1), 1-24
- https://doi.org/10.1186/s40854-021-00261-1
Abstract
Most loan evaluation methods in peer-to-peer (P2P) lending mainly exploit the borrowers’ credit information. However, the present study presents the maturity-based lender composition score, which exploits the investment capability of a group of lenders who fund the same loan, to enhance the P2P loan evaluation. More specifically, we extract lenders’ profiles in terms of performance, risk, and experience by quantifying their investment history and develop our loan evaluation indicator by aggregating the profiles of lenders in the composition. To measure the ability of a lender for continuous improvement in P2P investment, we introduce lender maturity to capture this evolvement and incorporate it into the aggregation process. Our empirical study demonstrates that the maturity-based lender composition score can serve as an effective indicator for identifying loan quality and be included in other commonly used loan evaluation models for accuracy improvement.Keywords
Funding Information
- National Natural Science Foundation of China (71974031)
- National Natural Science Foundation of China (71771034)
- Chinese Universities Scientific Fund (DUT19RW216)
- Economic and Social Development Project of Liaoning Province (20201slktyb-019)
- National Science Foundation (IIS-1648664)
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