Drivers of lending decision in peer-to-peer lending in Malaysia

Despite the emergence of peer-to-peer (P2P) lending in Malaysia, there is a knowledge gap on what drives the lending decision of P2P lending in the emerging Malaysian market. This research investigates how borrower's loan tenure, funding purpose, verified documents, accumulated transaction and repayment history, age, trustworthy and geographical resemblance affect likelihood of lending decision in P2P platform.

Using snowball sampling, survey data was collected from 300 online banking users who were willing to invest in online P2P platform from different states in Malaysia (i.e. Selangor, Malacca, Johor and Negeri Sembilan). For estimation, regression analyses were estimated.

The findings suggest that borrower's loan tenure and borrower's age increase the probability of lending in online P2P platform, while funding purpose of credit card reduces the likelihood of lending in the P2P platform. The findings contribute to the signalling theory.

The findings imply that borrowers need to concentrate on loan tenure and clearly indicate their age in the listing in order to increase the funding probability. Moreover, they are suggested not to submit listing for credit card as funding purpose.

This study is first in its nature about P2P lending in Malaysia and the possible factors that influence lending decisions in this new financing platform.